Tuesday, November 17, 2020

This is not a solution

Anger over the housing crisis and the betrayal of the kiwi dream has reached high enough levels that the Prime Minister feels she has to (be seen to) do something about it. Her solution? Subsidising property sellers:

While facing questions this morning, Ardern revealed the Government was looking into adjusting the thresholds around the home-start grants to make it easier for first-time buyers to get into the market.

The home-start grant enables first-time buyers access to $5000, or $10,000 as a couple, towards their first property.

There are a number of restrictions at the moment – including an earning limit of $85,000 per person, or $130,000 for a couple.

Ardern wouldn't say which areas of the eligibility requirements might be shifted, but she was clear that the Government was exploring making some changes.

But like the accommodation supplement, which sees the government effectively subsidising landlords, this subsidy is one that flows straight into the pockets of people on the other end of the transaction - in this case, the seller. So effectively Ardern's solution is to subsidise property speculators. And its hard to see how this won't simply lead to prices rising even further. And then rise further, as that price rise gives property owners more paper wealth, which they can then leverage for further speculation, and on and on it goes. But I guess it looks like a good solution if you already own a $2 million house.

Any real solution to the housing crisis means attacking wealth - either directly, by taxing it, or indirectly, by devaluing it (which is what mass house-building would do). Anything which doesn't attack wealth is not a solution. If Ardern is unwilling to attack wealth, she should resign and make space for someone who is.