Labour Opposes Affordable Housing…

Posted: January 24, 2012 in Uncategorized

The Labour party has today issued a press release demanding that housing be more affordable. That’s it though. No ideas. No proposals. Just an attack on Hugh Pavletich, co-author of a survey on housing affordability, with no alternatives suggested. What else can we expect from the dying party of socialism? Their methods have artificially inflated housing prices and the only options left run counter to their intellectually bankrupt philosophy.

The very simple proposal made by Pavletich, and attacked by Labour, is that the Auckland urban/rural boundary be eliminated. Instead of using the force of the state to restrict the building of homes within an artificial boundary, private property owners be left to regain their sovereignty over their own land and build what they wish. It is clear that the house pricing bubble is caused by Government regulation and the solution is the free market. Labour has no solutions to offer because they cannot stomach the ideas of freedom.

Labour’s Auckland Issues “Spokesperson” however is right on the money when he suggests interest rates have something to do with the speculation in housing that drives up the price. However he doesn’t suggest any options for addressing this problem. If he had a couple of brass balls the solution would be obvious. We should take away the power of the Reserve Bank to determine interest rates. It is a rare politician these days who would suggest price controls, but what the Reserve Bank does with interest rates is exactly that! The Reserve Bank uses its powers to set a floor for the level of interest charged by lenders and this in turn distorts the economy. When interest rates are artificially low, borrowing to invest in housing becomes more affordable and drives up the price of houses. If Twyford is economically literate to realise this then he is typically dishonest for not saying it.

When I stood for Parliament in Tamaki in 2011, I put forward four simple proposals to fix the problem of unaffordable housing.

1) Abolish the Resource Management Act and Council regulatory practices. Having to jump through hurdles, crawl for permission and fight heritage activists through court to make simple alterations or subdivide your own land can cost tens of thousands of dollars. Developers take this into account when they calculate housing investments. They pass the costs on to purchasers. Politicians and blood sucking bereaucrats get a power induced jolly; you get screwed in the wallet. An artificial limit on development enforced by a council reduces the amount of land available for development. Demand vs. forcibly reduced supply is a simple equation for high school economics students: the price goes up!

2) Make all forms of investment tax neutral. Labour sought to do this with their 2011 capital gains tax policy. Unfortunately, in usual big government fashion, they did it the wrong way. They claimed, probably correctly, that one of the reasons investment was attracted to housing and driving up the price, is because most forms of investment are taxed while housing isn’t. So their proposal was to tax income made from housing sales too. Of course adding a new tax wouldn’t work because it would increase the price a seller would need to get to make a sale worthwhile. Adding a capital gains tax would actually drive housing prices up further! I proposed the opposite concept – abolish taxation on all other forms of investment. There is absolutely no doubt what sort of effect this would have on housing prices and the economy in general. Not only would investment  move away from the housing sector, causing prices to drop, but as investing in any area became more profitibale it would be done more often. We would be the prosperous exception to the economic stagnation that affects countries all around the world.

3) Slash the functions of local government. The crippling rates Auckland City Council charges its ‘tenants’ don’t even cover the activities of the council, which recently voted itself another increase in its debt ceiling for the second time in twelve months. The council debates declaring itself a city of peace, funds public libraries, public parks, unpopular forms of music such as the Auckland Philharmonic, unprofitable transport and a myriad of other activities that the spinning of the world doesn’t really depend upon. Council should get back to the basics. Make sure the rubbish gets taken away; ensure our sewerage is treated and any other essentials the functioning of the city really depends upon. Thats it! Council debt would come down, rates would come down and the cost of owning your home would drop in turn.

4) Sell the Housing New Zealand state house system. Figures I obtained from Housing NZ show that the total value of all homes owned by the government department is $15.1 billion. That is huge! That amount would cover the government’s deficit for one year without any spending cuts at all (though I’m not suggesting for a second that we don’t cut spending). Basic economics tells us what would happen if the housing market suddenly had a supply of $15.1 billion worth of houses on the market. The sudden increase in supply would dramatically drop housing prices across the board, allowing young couples and families the opportunity to truly afford their own home instead of being tenants of the state. This final proposal however, would only have temporary benefit without following the other three as well.

Following the general election, I came to realise the voters of Tamaki aren’t ready for this message, but that doesn’t make it any less right. The basic fundamentals are clear. More freedom and less government means a drop in housing prices. More of the same means nothing will change.

  1. Cameron says:

    I study urban planning. You need to gut the RMA before removing the RUB. A report by Christine Fletcher’s council in 1999 said you could fit another 200000 people on the isthmus. Auckland doesn’t have the infrastructure to put people too much further out, it needs to allow growth in the city.

    • liberatenz says:

      I would do both Cameron.

      You’re putting you collectivist thinking before the concepts of freedom and property rights. Probably why you campaigned for the Act party – they tend to put free and property rights second too. 😉

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