Labour's proposed Affordable Housing Authority will have powers to buy land compulsorily, says its leader Andrew Little.

The proposed authority would partner with developers to build 10,000 new homes a year priced below $600,000 in Auckland and below $500,000 elsewhere.

Little said it would need to buy land compulsorily to put together land parcels big enough for bulk developments. "There will have to be acquisition powers."

His housing policy, announced to almost 300 party faithful in New Lynn yesterday, follows Labour's 2014 election promise to build 10,000 "affordable" homes a year for the next 10 years - half of them in Auckland.


Labour would give $2 billion in revolving capital to the Ministry of Business, Innovation and Employment to tender for some of the homes itself, and $100 million to the proposed authority to work with private developers willing to build at least 50 per cent of new homes in a development below the "affordable" limits of $600,000 and $500,000.

The policy also proposes three new measures to crack down on speculators driving up land prices:

Capital gains would be taxed on homes sold within five years, up from National's current two-year "brightline test", except for owner-occupied and inherited properties;

Landlords would not be able to avoid tax by charging less in rent than they pay on mortgages and using the resulting loss to offset their income from other sources;

Overseas residents would be banned from buying an existing home unless they have NZ citizenship or permanent residence. Foreigners could still buy newly built homes.

Economist Shamubeel Eaqub said the policy correctly targeted a need to build cheaper homes.

"Left to its own devices, the market will build homes for rich folks because that's where the profit is," he said.

But Andrew King of the Property Investors Federation said the proposed capital gains tax on homes sold within five years would drive landlords out of the market and reduce the supply of rental housing.

Ashley Church of the Property Institute said Labour's aim to sell homes for under $600,000 in Auckland was unrealistic because "land costs in most parts of the city are already approaching or exceeding $500,000 to $600,000 per section".

But Eaqub said lower land prices could be achieved through smaller sections and more townhouses and apartments.

Labour housing spokesman Phil Twyford confirmed the affordable houses in Auckland would be mostly townhouses and apartments with an average floor area of about 100sq m.

"They are not mansions," he said.

He said Labour would cut costs by "tendering at scale, bulk-buying supplies and offsite manufacturing", and by not charging a profit margin.

The Government has signalled a similar change. Prime Minister John Key said this month he was looking into "urban development authorities" in areas of high housing need.

Economic Development Minister Steven Joyce said Labour's package was "primarily an endorsement of the Government's approach with a few tweaks to it."