National’s big election initative on housing was a woeful anti-climax. The offer to top up qualifying first home buyer’s Kiwisaver deposits does nothing to address affordability. Indeed if the First Home Buyer subsidies of Australia and Britain are any indication it will drive affordability further out of reach as rising prices more than outweigh slightly larger deposits. It encourages low income FHB to take on more debt than they should in a grossly inflated property bubble. It is irresponsible and I would guess has Graeme Wheeler seething as it helps to reduce the effectiveness of the Reserve Bank’s LVR restrictions, put there in the first place to stop young people borrowing too much and facing possible negative equity, and exposing the nation to financial instability via excessive mortgage lending. The RB wants the housing bubble to slowly deflate. National, Labour and the trading banks want it to keep growing because the housing market and the mortgages backing it are now regarded as too big to fail, the wealth effect from rising prices makes voters feel good and you guessed it, feel better about borrowing and consuming more.
I noted in a post in May that only falling prices can restore affordability. No political party will advocate this. National and Labour are trying to increase supply without properly addressing demand. Both want to help FHB buy into an over priced market, National with this subsidy and the claim of lower interest rates under them; and Labour with Kiwibuild and its 100,000 supposedly “affordable” new homes. Neither party is suggesting compulsory acquisition of urban fringe land off land bankers at its unimproved rural price and getting together with developers and local bodies, as the first Labour government did, to build thousands of entry level state houses because they would be affordable but they would undercut the inflated prices of their neighbours and pop the bubble. Nor will the Greens support this because of their ideological opposition to urban sprawl, even though they cannot explain how urban intensification in Auckland will create affordable dwellings. It can’t and it won’t.
Last year I wrote;
In 2013 National has left everything to the “market”. There is no national effort to finance, design, build and rent to low income families. There is no attempt to harness the resources of the unemployed or to utilise local materials and manufacturers, to give local businesses the assistance to gear up to meet a clear failure in the housing market, even in Christchurch after the earthquake apart from a very few temporary villages. The price of land and the cost of finance precludes low cost housing being built by private developers. Only the government has the resources to make it happen and the ability to finance it with low or zero interest public credit. But as in most of New Zealand’s history, progressive policies on property and how it is financed does not align with the ambitions of the private banks, who now more than ever, are dependent for their profits and solvency on ever escalating property values and the mortgages that back them.
Nothing has changed