Finally, Auckland's Generation Rent has found someone who is talking about the elephant in the room - rampant speculative demand for housing by landlords.

Everyone worried about Auckland's astonishing house prices should read Reserve Bank deputy governor Grant Spencer's speech.

He spelt out in the plainest language yet that property investors are taking advantage of tax incentives to use cheap debt to buy as many houses as they can.

The powers-that-be have created an opportunity for extraordinary tax-free gains for these investors.

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These people see net migration at record highs, strong economic growth and a shortage of 25,000 dwellings that is not being whittled away. They see voters decided against a capital gains tax and limits on foreign buyers at last year's election.

They even see that Labour leader Andrew Little is going soft on taxing capital gains and New Zealand First leader Winston Peters has never been keen on the idea.

They've seen the median house price in Auckland rise 20.1 per cent in the year to March, once adjusted for the skewing effects of all the million-dollar-plus sales.

They can see the Reserve Bank's hands are tied because inflation is below its target and it can't put up interest rates. They can see banks ramping up competition for their business through mortgage brokers.

They are on the biggest investment-free kick in our history.

And they know no one is going to stop them.

Spencer pointed out in his speech that new mortgage lending was growing at an annual rate of 20 per cent. Borrowing by Auckland landlords was the biggest and fastest contributor.

Over the past three months, more than $15 billion of new mortgages were pumped into the market and more than half went into Auckland.

More than 2500 houses a month are being bought by landlords. That's up 25 per cent in less than a year.

The Reserve Bank has exhausted its toolkit, having put up interest rates and set limits on high loan-to-value ratio (LVR) lending. It is looking to increase capital requirements for landlords' mortgages, but it knows it's not enough.

Exasperated, the Reserve Bank has asked for help to control the risks to New Zealand's banking system, which relies on house values to back 60 per cent of its loans.

Spencer called for the Government to revisit the tax incentives for landlords.

He also suggested new tax measures to encourage land bankers to put houses on undeveloped land.

The Government's response was to essentially say: "Talk to the hand."

Building and Housing Minister Nick Smith described the deputy governor's comments as vague, and repeated the Government's opposition to a capital gains tax.

The Government is now ignoring the crisis of demand and supply in Auckland by refusing to consider taxing landlords' property; slowing inward migration; limiting foreign buyers; building large numbers of new affordable houses itself; and funding the infrastructure needed to underpin those new houses.

Generation Rent can now see the issue clearly. The Government's top economic adviser has said landlords' tax incentives should be reduced and central Auckland apartments should be built in defiance of the Nimbys controlling Auckland politics.

Council and Government politicians are refusing to take that advice. Landlords are celebrating because nothing will change.

At what point does Generation Rent start using its votes to change those politicians?

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