Thursday, April 23, 2015

National's hand-wringing on housing

Auckland house prices have exploded again, and are at the silly stage where the houses actually earn mor ein capital gains than their inhabitants do in salaries. So what is the government doing about it? Nothing:

The Government has effectively left nothing "undone" to tackle sky-rocketing house prices in Auckland, Finance Minister Bill English says


"The best thing we can do for low and middle income families in Auckland is to allow the place to grow - growing up or growing out, that's the choice for Auckland to make," English said.

"You see in the media every day now commentators ranting about how the Government should do something about the housing market. Well I think Mayor Len [Brown] would agree there's pretty much not really anything left undone that can be done that happens fast enough.

Bullshit. There are two very obvious policies the government could pursue to end this rampanat inflation:
  • They could tax capital gains, and so make house price speculation unprofitable.
  • They could address the underlying supply issues with a mass building programme aimed at increasing the supply of decent, affordable homes.
So why don't they? For the obvious reason that a) government ministers and MPs are benefitting from the boom themselves; and b) any real action to curb Auckland's insane house-price inflation would see a lot of paper wealth evaporate and over-leveraged house-buyers trapped with negative equity - something unlikely to endear government to house-owning Auckland voters. So instead we get hand-wringing and claims of powerlessness. But those claims are false. The government is not powerless; it simply chooses not to act.