Renters are toast…

…but not for the reasons you might think.

Bernard Hickey believes all the evils of the world are caused by those dreadful baby boomers, who are determined to rob the next generation (their own children, that is) of any kind of decent life. Who exactly he thinks will inherit the massive fortunes of the evil baby boomers is not clear, but all I can say is that, if you are a baby boomer, consider yourself an Orc in the eyes of Bernard Hickey. quote:

You may be hearing a lot of talk lately about capital gains taxes and a surge of new housing supply and a transformation in the economy. You may even actually think things are about to improve and that a first home is a realistic prospect, or that an affordable rental is just around the corner. end quote.

It is all about supply, dear Bernard. Remember how the government promised 10,000 new houses a year, but have so far built 18? How exactly are baby boomers to blame for that? quote:

You think your parents and grandparents and their friends actually want to help you live the good lives they experienced as the luckiest generations. They may even have convinced themselves and you that they do really want to do this, but they don’t really. They’re leading you up a garden path. end quote.

This is a mean and vicious thing to say when so many parents give their children money for a deposit, guarantee their mortgages or even buy rental properties for them to live in. At least half of all first time buyers have parental help. But hey. Never let the facts get in the way of a good rant. quote:

So many hopes were packed into Sir Michael Cullen’s Tax Working Group. It was the consolation offered up by Jacinda Ardern and Grant Robertson before and after their last-minute decision in the 2017 election campaign to abandon all hope of a capital gains tax in their first term. end quote.

They wanted to win an election and campaigning on new taxes of any kind is usually political suicide. Nevertheless, they promised us the Tax Working Group, and here we are. quote:

A careful read of the?interim report from Sir Michael Cullen’s group?shows it it believes in its bones that any form of tax on capital gains, even a limited form that excludes the family home, will be almost politically impossible. It reads more like a list of excuses for why it can’t be done, than?an argument for why it should. end quote.

Matter of opinion. Those of us in the world of tax know CGT will definitely happen, unless there is a change of government. quote:

Secondly, it argues the lack of a tax on capital gains isn’t the main reason for unaffordable housing, but that putting on a capital gains tax would make renting more expensive. end quote.

Which just shows (and I can’t believe I am saying this) that Michael Cullen understands the property market better than you, Bernard. Of course rentals will become more expensive, because the market will factor in the extra costs. quote:

Thirdly, Cullen’s group rejected any forms of broad-based wealth or land tax on the grounds it would hurt farmers. It would clearly have been the most effective and easiest tax to apply that actually raised revenue. Even National’s Tax Working Group thought it was a good idea. Yet Cullen’s ruled it out. end quote.

So Bernard wants a wealth tax while Cullen has mostly ruled out any form of tax on unrealised gains. Taxes in this form are generally considered unfair, because wealth is mostly held in assets, meaning there is no cash to pay the tax. Bernard doesn’t just hate boomers. He’s got it in for wealthy people as well. quote.

Way back in 2007, John Key campaigned to remove regulations that were restricting housing supply. He described house prices then as in crisis and that more houses was the answer. His views on that changed once he was in Government and the Global Financial Crisis had started.?end quote.

I agree with this, at least in part. National campaigned on changes to the RMA which they never implemented when they had the political capital. By their third term, they had the political will, but their coalition partners refused to play nice. Bernard should stop blaming baby boomers for the woes in the housing market and look to Peter Dunne instead.

And then he blames the government for not funding infrastructure. quote:

The other proof that older property owners aren’t serious is the refusal by Governments to fund infrastructure development on a scale that would make a difference. Both the National-led Government of 2008-2017 and the Labour-NZ First coalition now have prioritised debt repayment over building the roads, railways, hospitals and schools needed to underpin significant extra housing supply. end quote.

Note that he wants the government to fund all infrastructure projects, even though councils will get the benefit of the revenue streams, and he wants the government to ease its debt repayment programme to do it, even though fiscal responsibility was one of the strong points of the last National government, and saved us from the worst effects of the GFC.?Basically, Bernard wants to turn New Zealand into the Greece of the South Pacific.

I have some suggestions that would help both renters and first-time buyers:

  • Stop bashing landlords and encourage people into residential property investment.
  • Go ahead with RMA reforms and force councils to release land for building (John Key did threaten to do this, but stopped short.)
  • Stop councils from charging exorbitant fees for building permits
  • Encourage the banks to lower required deposits for first-time buyers
  • Slow the rate of immigration significantly.

Instead, Bernard wants to drive people with wealth out of the country, force the government to go broke, and slap any possible form of taxation on people with assets, just so that today’s young people can get into the housing market more easily than their parents ever did.

Bernard needs to understand that further punitive measures are not going to help the housing market, and many of those already implemented have made little difference. Suggesting the country drop its programme of fiscal responsibility is totally reckless. But like a lot of journalists, Bernard Hickey can write anything he likes because he has no skin in the game. Those of us that do tend to view the situation differently.