Five years ago, when it was still fresh, it was looking for a way to discourage property investment. A tax working group studied options, including a capital gains tax, and the Budget that year removed tax allowances for depreciation.
It didn't make much difference. Over the next few years earthquakes in Christchurch and immigration in Auckland sent prices soaring again. The Government decided the problem was simply a housing shortage which it could blame on unpopular Auckland Council planning.
That was good politics but economic bollocks, and I think Bill English knows it. Actually, everybody knows it. Auckland property is simply the easiest and best investment known to most of us.
We can borrow to buy it knowing rent will pay for the loan and we can bank its rising value. The Reserve Bank keeps warning that prices can fall but we don't believe it. Not after the way prices here barely felt the global crash.
There is no limit to the wealth to be made and no limit to the number of houses we might finance on the equity we're building.
These new subdivisions of good, "affordable" houses that represent the Government answer to the housing crisis are perfect rental stock. Initial sale conditions might favour first-home buyers, but they will soon come on the open market. I think I'll have six.
In our hearts we all know this is no good for social equity or the productive economy. It has become so hard for people without much equity to afford a house that we are becoming a society of multiple-property owners and perpetual tenants. Meanwhile, so much of our capital is in residential real estate that far too little is funding profitable productive ventures.
We're told there is no such thing as a silver bullet for this problem, but there might be. The Budget could do something truly daring and probably effective. It could stop tax deductions for interest paid on mortgages for residential property.
The outcry from investors would be immense - they'd probably find this one even more fearful than capital gains tax. But politicians would find it easier to answer, for the mortgage interest deduction is grossly unfair.
Only owners of rental property can claim it. People paying for a mortgage on the house they live in cannot deduct their interest payments from the tax on their personal income.
And the unfairness does not end there. Interest deductibility gives investors an advantage at auctions against first-home seekers. It lowers the cost of capital for investors, allowing them to borrow more and bid higher. How is that fair?
The property lobby will answer that rental housing should be treated as a business rather than compared to owner-occupied houses. It claims to be a business like any other. No other business provides a service few of its customers want. Most of them want to own a house.
This is a business doing social and economic damage and we need a government that will act.
We needed it a long time ago. Each year, the number of first-home owners with eye-watering mortgages has grown and they will be fearful that any effective action on the market will leave them owing more than their house is worth. They would need to sit tight for a few years.
Rising rents would be another transitional hardship as landlords tried to cover the loss of the tax deduction. But many would opt instead to offload properties before the change took effect. Many more houses would come onto the market and prices would come down for those needing a home of their own.
I don't have high hopes for the Budget. If the Government was getting serious about the housing market at last, we would have had a hint by now.
Instead, we had another sideshow with the Auckland Council this week over the supply of services to outer subdivisions.
Unless we are in for surprise, the end is in sight for the Government's natural life.
