CHAPTER 5
Housing policy and political realities Political incentives Successive governments have either denied the housing problem or failed to deal with it adequately. Previously, Labour attributed the excess demand to speculators from China.77 In December 2020, Prime Minister Jacinda Ardern said home-start grants for first-home buyers was a potential solution.78 In 2016, then Prime Minister John Key called excess demand a “housing challenge” and denied there was a fundamental problem.79 National’s thenHousing Minister Nick Smith largely ignored the problem, saying “someone has to buy the houses and so of course they will be affordable to somebody.”80 Both sides either refused to accept responsibility or tinkered around the edges of an institutional problem. Many political science studies suggest that politicians tend to focus on doing what is necessary to get re-elected – especially in New Zealand’s short three-year election cycle. According to Randall G. Holcombe, the ‘median voter theory’ legitimises electoral competition towards the centre of politics.81 Political incentives are one of the core reasons for the continuing housing crisis. Despite homeownership being the lowest in 70 years, 65% of Kiwis own properties82 and do not want prices to fall. Case in point is former Australian Prime Minister Tony Abbott saying he wanted to see house prices to increase in Sydney despite the importance of housing affordability. “As someone who, along with the bank, owns a house in Sydney I do hope our housing prices are increasing,” Abbott said in 2015.83
International housing policies and examples International cities and financial hubs such as Hong Kong, Vancouver, Sydney, Melbourne, Los Angeles, London, Auckland, Singapore and Seoul are now among the most unaffordable cities for housing.84 Governments around the world are focusing on curbing excessive demand instead of scaling up supply. • In 2013, Australia banned non-residents from purchasing existing houses and imposed restrictions on foreign investment into property markets.85 The government also brought criminal charges against those who persisted with illegal property investment.86 The housing market in cities such as Sydney remain extremely expensive. • South Korea is suppressing housing demand to deal with Seoul’s unaffordability crisis and curbing domestic and international speculation. Using these “regulations-driven” policies, the government has drastically increased taxes on property owners and imposed a 20% acquisition tax on foreign investors.87 House prices in Seoul still rose by 56.6% since 2016.88 In 2021, President Moon Jae-in acknowledged the failure of policies targeting housing demand: “We thought measures focused on curbing speculations would lead to more supply but failed to stabilize the real estate market.”89 • Canada is pushing demand-side policies such as tax on foreign property speculation, mortgage stress tests, and the First-Time Home Buyer Incentive.90
THE NEW ZEALAND INITIATIVE 37
