Monday, June 08, 2015

A landed gentry

Problems of the Auckland property bubble: we're getting a landed gentry again:

High house prices are creating a class system in New Zealand that's frighteningly similar to that of Britain, economist couple Shamubeel and Selena Eaqub claim in their new book Generation Rent.

In fact, the pair dub property-owners as this country's "modern landed gentry" whose fortune in owning homes will be passed on to their children.

Though they don't use the term, in a country with property landed gentry, those unable to afford houses are clearly property peasants forever paying rents to the gentry, dependant on their goodwill not to be evicted.

Caveat: Auckland property owners. Things elsewhere are nowhere near as insane. But we're looking at a permanent wealth divide, both between home-owners and renters, and between Auckland and everywhere else. And imagine what's going to happen when landed Aucklanders start leveraging their bubble-wealth to start buying up the rest of the country...

The Eaqubs call this "a serious and persistent attack on New Zealand's identity as an egalitarian society" - and they're right. Auckland's property bubble is challenging the core values of our society. As for how to fight back, just look to history: in the late C19th New Zealand was developing an unwelcome landed gentry of high-country farmers with vast estates. The Liberal Government strangled that would-be-aristocracy at birth with land taxes, which forced the breakup of those estates. We need to do the same again - not just capital gains taxes on property speculators, but estate taxes and restrictions on the use of trusts to counteract those disparities of wealth and prevent them from accumulating.