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It was a slow moving disaster. And now, at it’s worst, it’s a massive intractable problem affecting millions of people. It’s the sort of situation that could have maybe been averted if people had taken action a whole lot sooner, but they didn’t.
No, I’m not talking about the container ship in the Suez Canal – far and away my favourite story of the week! I’m talking about the housing crisis, and the government’s new efforts to calm down the ludicrous changes in the housing market.
I know I go on about housing but apart from Covid-19 it’s surely the most immediate crisis we face.
What do I think of the announcement? It’s a punt. It’s a gamble. A bet. Jacinda Ardern wouldn’t say this week what the changes to the brightline test or interest deductability will do to house prices or rents. In an interview I did with Grant Robertson that will air on Q+A tomorrow, the Finance Minister is similarly non-committal. The government introduced these changes but they don’t honestly know what the effect will be. They hope it cools the market, but they don’t know.
Labour was elected three-and-a-half years ago on bold promises to sort the housing crisis. They don’t talk about transformation much any more, but our housing market has certainly transformed, just not in the way they wanted. Since taking over in 2017, the median price nationwide has increased 47%. Of course, the pandemic has played a big role in that. But keep in mind, house prices increased 26% under a Labour-led government’s watch before the pandemic. And that kind of increase wasn’t enough for Labour to push the policies we’ve seen this week.
Indeed I think it’s pretty obvious these policies have been put together in a rush. Treasury hasn’t had time to do its sums. They don’t have much of the detail about exemptions and new builds. The brightline extension and deductability changes were not included in Labour’s electoral campaign less than six months ago. Again... this is a gamble. This is a punt.
All that being said, from a political perspective, I think it’s a good punt. Labour is doing a much better job of reading the public mood on this, than National is in opposition. They sense that even the so-called Mum-and-Dad investors of the World with a few properties up their sleeves are probably feeling a little uncomfortable with the market’s recent growth.
When it comes to broken promises, they’ve clearly misled voters on the brightline extension but from the government’s perspective, it won’t matter. Grant Robertson is taking the fall. If his ruling out the brightline extension last year was really just a case of speaking too definitively, he could have clarified his comments at the time and before people voted. But Robertson will take one for the team. If it was Jacinda Ardern who had emphatically ruled a brightline extension in the same way her Finance Minister did, there’s no way they would have introduced that change this week.
From an economic perspective, is it a good punt? It depends who you listen to. Every economist has a different forecast. Maybe the changes will be successful in just getting everything to chill out for a bit. Some forecasts have a drop of up to ten percent.
For me, it’s simple. This problem has been left too long. The time to act wasn’t this week. It was years ago. We needed political courage but instead, for years, successive leaders have only introduced policies they were sure were politically popular. Policy-making by opinion poll.
The ambulance is officially at the bottom of the cliff.
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