Housing 101 – Back to Basics

The United Nations Charter states in article 25 of its Universal Declaration of Human Rights that “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, and medical care and necessary social services”.

Any discussion on housing needs to start from the premise that adequate housing has been identified as a basic human right. Housing, whether rented or owned, needs to be affordable for everyone. Houses are for people to live in, to provide shelter, not a way to make money.

The second premise needs to be that it is the duty of government to make sure that everyone has adequate housing. Market forces provide a way for people to make money out of buying and selling houses. Market forces will not enable us to meet our obligations under the Universal Declaration of Human Rights. Market forces do not provide affordable housing for everyone.

The Reserve Bank has identified the need to curb the number investors in the housing market because they push up house prices in areas where there is high demand, like Auckland. It is up to the government to make this happen.

It will not happen while the main government intervention is subsidies to investors who charge their tenants rent that they couldn’t possibly afford from their earned income. The same investors who take advantage of capital gains from on selling as soon as the value of the house goes up enough.

Deputy Governor of the Reserve Bank Grant Spencer suggests “fresh consideration of possible policy measures to address the tax-preferred status of housing, especially housing investment.” (3 News Wed 15 April) A capital gains tax on everything but the family home is one way of achieving this. A more generalized annual wealth tax on all combined assets over a certain value e.g. a million dollars is another way. And a financial transactions tax added in would further assist in deterring those whose only interest in real estate is to make a quick profit.

Another way to help reduce demand for housing and ease prices would be by giving priority to people who actually want to live in New Zealand. Limit sales of property to permanent residents, or people who intend to seek permanent residency, in New Zealand.

However, house prices in relation to incomes have escalated to the point that other intervention is necessary. Low or no interest loans to low-to-middle income earners is a well proven strategy. It’s how most people bought their first home from the 1950s to the 1980s. It worked then and it will work now.

Building more state-owned rental or rent-to-own houses is also a priority. Again it worked in the past and would work again now. The challenge is that new state houses should not only be affordable, but correct the situation that many low income earners now find themselves in; living in houses that are a long way from employment, shops, essential services such as schools and medical centres, and other public amenities.

There is plenty that could be done to rectify the housing problems in New Zealand. But it does hinge on a change of attitude, or reframing the debate. It means accepting that everyone has the right to adequate housing and it is up to the government to make it happen.

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