A Pox On Both Your Houses
If there’s one euphemism I’m sick of hearing it’s “property investment”. When you go to buy eggs at your local café you don’t get to pretend that you don’t know about battery farming and from now on when you buy an investment property you no longer get to pretend that you’ve never heard of gentrification.
It’s recently come to light that despite some hand-wringing from NZ Labour, only 3% of properties sold in New Zealand in the last few months were bought by foreign investors. Some pundits leapt on this as proof that the housing crisis is a myth or at least an exaggeration. Others argued about the 3% figure claiming it reflected a slump in international speculation not actual ownership rates. Many discussed the dangers of xenophobia and marketplace scare-mongering. Still, the vast majority of people just shrugged their shoulders and went back to worrying about bills.
The scary foreign investors narrative might have taken a hit this week, but houses are still priced out of reach for countless low-to-average income kiwis. We don’t get to blame China for our problems and are now faced with the ugly truth that it’s kiwis who are ripping off kiwis. If you own a secondary investment property in New Zealand you are part of the problem. There is no way around this any more, no ethical wiggle room, you made a choice to participate in a deeply flawed system that continually robs other people of their health, wealth and happiness. You’re looking at the lowest common denominator for human well-being, the foundation in Maslow’s Hierarchy of Needs, and wondering how much money you can squeeze from your fellow humans when you dangle a basic requisite for survival over their heads. Shelter is not a privilege, it’s a necessity, yet we are allowing an almost completely unregulated marketplace to middleman access to it in order to arbitrarily increase costs to consumers.
Have-nots keep being told it’s easy to get on the property ladder, they just have to lower their standards. Wait thirty more years! Stop eating food! Buy in Morrinsville! The latter of these might sound less ridiculous than the other two but young workers being told to just buy up outside the cities where, for many industries, job prospects are completely non-existent is borderline untenable. The rising tide of the Auckland housing market is lifting most of these smaller ships along with it anyway, so add to this the opportunity cost from loss of employment options plus the inflated cost of longer commutes and we may not even end up breaking even on these “cheap” rural homes. Young people need the city, but retirement in Morrinsville is quite lovely I’m told. I’m not trying to boomer-bash here either, the issue is a class divide not an age divide, it makes sense that someone in their forties will have had more time to accumulate assets than someone in their twenties. The problem is when that accumulated wealth is then used to outbid young first home buyers in order to start collecting rent payments – or sell it on six months later for a cool $50k profit. So when people flip out at Boomers over this, it’s because they’re demographically overrepresented in the rental property market; when I say “young people”, I do so because the home ownership disillusionment is an insurmountable issue for the young and asset-poor.
It also doesn’t help that as we start talking about these issues, it’s the wealthy who, sensing an impending proletariat revolt, proceed to cry foul. They furrow their brows and lecture us again on the dangers of socialist thinking, using terms like “class warfare” to paint egalitarianism as inherently violent. You can’t declare a war that’s already begun. This war started centuries ago when a handful of people with immense intergenerational wealth realised that owning the land was tantamount to owning the people on it. They grabbed up every scrap they could and started calling themselves ‘lords’. This is referred to as ‘feudalism’ and is widely recognised today as a sub-optimal societal structure for the 99% of people who weren’t born rich. Quality of life has improved of course, but we’ve still managed to replicate the same exploitative power structure in the present day, we even kept the name “Landlord”. New Zealand’s housing market is increasingly looking like the last few miserable rounds of Monopoly where a couple of players have locked up all the valuable street tiles and the rest are just praying to land on “Income Tax”, unlike Monopoly there’s no “Flip the board and go to bed” option.
The entire practice of property investment is long overdue for a smear campaign. We need to start changing minds on this because the truth is we live in a Polligarchy, where laws are only tabled on the backs of overwhelming public opinion. The people you’ll most often see opposed to housing market regulations like CGT are people who stand to lose the most from it, speculators and landlords, but they should lose, they have to lose. Equality is, sadly, a zero sum game where if we want to help the many we all have to chip in some koha. We can’t simultaneously move people from sleeping to cars to warm, dry houses while also maintaining the meteoric return on investment for our three bedroom bungalow in Mt. Eden. In the upcoming election cycle when we start hearing the inevitable like tax cut promises we need to be wincing instead of nodding. Students and low income workers being forced into “hot-bedding” in a shoebox-sized apartment should be a national disgrace. Instead of seeing house-flipping as a legitimate occupation, it should be seen for what it really is: opportunistic, selfish and ultimately unethical. A lucrative and effectively untaxed income.
New Zealand’s biggest economic problem isn’t doll bludgers, it’s land bludgers. If you’re in a financial position where buying more than one house in New Zealand is a non-laughable proposition for you then you’re already comfortably nestled in the upper wealth brackets of this country, so just chill for a bit and let the rest of us have a go.
You wrote : “unlike Monopoly there’s no “Flip the board and go to bed” option.”
There is. It is called suicide, and I’m sure some people have already taken it.
That ‘option’ has some fairly sad and long term consequences for the surviving family and friends though… there are always better ‘options’ than suicide.
This crossed my mind when writing, I removed a whole segment on it actually but only because it felt half-baked. I have a lot of ideas about how societal and economic issues factor in suicide rates that I might one day commit to page.
One of the more awful “Just go to bed” options, it also doesn’t provide the resetting jubilee that comes with the “board flipping” side of it. I really hope we can use all this anger and pain to mobilise people towards social change before despair creeps in and makes them want to quit.
“gentrification” maybe, “speculation” definitely. Until the housing investment/speculation is taxed like all other investments/speculations e.g shares, then nothing meaningful will happen in the housing crisis. The next step would be to use that tax money to build properly designed social housing and to renovate the existing state housing stocks. It might even provide employment for a few people if government and industry made an effort. You could also put in place steps like foreign investors could only invest in new houses, and “ghost houses” were taxed/rated differently. Also land bankers could face penal taxes. But of course you’d have to have a government that was thinking creatively and humanely and we haven’t got one of those.
Absolutely. I didn’t want to spend too much time talking about these things because I feel they’ve been discussed ad nauseam by writers better than me so instead focussed on a sociological gripe of mine.
Since my number one complaint I’ve had has been “all problems, no solutions!” however let me here in the comments quickly summarise what are, in my mind, the three most obvious solutions:
1. Implement a meaningful CGT ie. one that can’t be easily circumvented.
2. Stop negative gearing on properties and rewarding people for sitting on land.
3. Invest in intensification and state housing to help curb property value growth.
Killing speculation and house-flipping is definitely the biggest and most important step. Calling these practises out is an important step.
Hi Oliver. I am a foreigner in New Zealand. How can people in NZ make the government to introduce a CGT? Sorry for my ignorance but I would like to know what – if any – the ways are to ask the government to do something that they do not want to? Thanks.