EMBARGO to 9am Tuesday 23rd July

Minto for Mayor

Mana’s policy on affordable housing

As part of the Ikaroa-Rawhiti byelection Mana candidate Te Hamua Nikora announced on 20 June Mana’s updated housing policy which included:

1. 10,000 state houses built each year until we have housed everyone who needs a home.
(Note that contrary to some suggestions these houses will be allocated on need)
2. Bringing back and extending the former Maori Affairs Housing Loan Scheme which involved low deposit and low interest rate loans to build houses on Maori land. It is intended to update this scheme to allow for building on local authority and Crown land.

Today’s Mana announcement is to extend our housing policy to all New Zealanders and in the context of the Mayoral campaign to look particularly at what Minto for Mayor would do for the people of Auckland where a housing affordability crisis is in full swing.

Firstly Mana recognizes that the current housing market is skewed dramatically in favour of property investors rather than first-home buyers. Property investors can deduct the interest on the mortgage, their insurance and home maintenance from their income before they pay tax. First home buyers can’t. First home buyers pay tax on every dollar they earn and every dollar they spend and can’t deduct interest, insurance or maintenance before paying tax.

Just how dramatically the market is skewed towards property investors is this full page advertisement from the Singapore Straits Times newspaper of 1 June 2013 encouraging people to come to New Zealand and invest in property.

The advertisement highlights –
• Great rates of return on residential and commercial property (and five nights free accommodation in New Zealand for the first 10 coming to see!)
• And most significantly NO STAMP DUTIES and NO CAPITAL GAINS TAX are listed as benefits.

Similar articles have appeared in Australian papers indicating the same thing.

Again this highlights that housing policy in New Zealand is set up for property investors rather than first-home buyers.

What Mana would do is transfer the favourable bias from property investors to first home buyers by imposing a tough capital gains tax on investors which would help fund a home ownership scheme for first home buyers.

In other words we will use part of the income from a capital gains tax to support low-interest loans for first-home buyers.

So our major national housing policy announcement today is to reintroduce Home Ownership accounts which were operated by the former Post Office Savings Bank whereby low interest loans were extended to first-home buyers who had demonstrated a savings history indicating they could service a mortgage. I myself bought my first home using such an account in 1986. Times have changed since then but not the need for families to have affordable homes and the opportunity to own their own home. This policy would be run through Kiwibank.

What about Auckland specifically?

This city is in the grip of catastrophic market failure which has left Aucklanders with –
• Developers building houses only for upper-income earners
• High rents for poor quality accommodation
• A drastic shortage of affordable rental accommodation
• Land speculators ripping us off
• Housing policies for property investors rather than first-home buyers

And in the middle of this crisis we have the government and Auckland Mayor Len Brown signing a heads of agreement on 24 July last year for the removal of affordable state homes from Glen Innes. These are to be replaced with seaside mansions for the wealthy and high-rise slums for families on low incomes. Len Brown supports the destruction of GI, Point England and Panmure. He is standing with the 1%. He wants those suburbs for the rich while the poor are out of sight of the sea and out of mind.

It’s one of Len’s most shameful actions as mayor. He’s a rollover – he signs his name wherever the corporate sector tells him.

In contrast to policies for the 1% Minto for Mayor’s housing policies for Auckland will:

(a) Have the building of 20,000 affordable council rental homes underway in the next term of council.
(b) Require property speculators and property developers to pay the increase in value on land when council zoning changes inflate the land value. (“betterment” charges) This will provide hundreds of millions to be invested in additional affordable, high quality council rental properties
(c) Establish a “Charter of Rights” for Aucklanders in rental accommodation
(d) Pressure the government to allow Auckland City to impose rent controls till Auckland’s housing affordability crisis is over
(e) Require all new developments of more than 10 homes to have a minimum of 50% of affordable homes

So looking at these in more details:

(a) Have the building of 20,000 affordable council rental homes underway in the next term of council.

What would this look like?
Auckland Council owns 300 hectares of land which is currently being assessed for housing suitability. If all this land could be built on then the building of up to 9000 affordable Council rental homes would be possible without the need to purchase land. Other land would be
acquired as needed. These 20,000 homes would be built by the council utilizing cheaper rates for borrowing, cheaper building supplies through bulk-buying arrangements and reduced compliance costs. These homes would set the standard for affordable living in Auckland.
How much would it cost?
A stand-alone council housing unit will be established with approx. $200 million in seeding funding and with further income provided by “betterment levies” from property speculators (see later) Income from these rentals will be reinvested in building additional affordable rental homes. As part of this policy the council will be prepared to work with community not-for-profit groups and innovative projects such as “earthship homes” where such groups have demonstrable community support and can provide high quality, affordable outcomes for families.
Why don’t we just leave it to the private sector?
The private sector has failed to provide what Aucklanders need. They have built no affordable homes in the city for the past decade because developers make bigger profits building large houses ($500,000 up) which are well out of reach of most families wanting to rent or buy. The new 39,000 homes in three years promised by the government and Len Brown will be unaffordable for most Aucklanders.
What are the benefits?
Auckland City is already 30,000 houses short for its existing population. This programme will directly address this need as well as having the flow-on effect of bringing down rents across the city as the supply of affordable rental properties increases.

(b) Require property speculators and property developers to pay the increase in value on land when council zoning changes inflate the land value

What would this look like?
Currently property speculators and developers buy land on Auckland’s rural outskirts and within the Auckland urban area and “land-bank” it while waiting for the value to increase through council zoning changes. This policy would mean that any increase in the value of the land through changes to council zoning would be charged to the developer as a “betterment fee” when the land is developed.
For example: A 29 ha block at 39 Flat Bush Road was bought in 1995 for $890,000 and is now on sale for $112.6 million with the value increase attributable to the change in council zoning from rural to residential. As things stand this is an unearned, untaxed income for a land speculator.
Note: Before 1953 such betterment fees were charged regularly at 50% of the increased land value and were pivotal to housing development. They were used for example to develop almost the entire Hutt Valley in the decade following the Second World War. They can do the same thing for the housing crisis facing Auckland now. Charges on land speculators like this are commonplace overseas where the “value uplift” is at least shared between the speculator and the community.
How much would it cost?
Nothing - it would bring in additional revenue to council.
Why not leave the profit to the speculator?
The speculator or developer has done literally nothing to justify receiving the unearned income which accrues as a result of a council decision to rezone land. Auckland Council ratepayers should benefit rather than speculators or developers.
What are the benefits?
This would collect hundreds of millions of additional funding each year for further council investment in affordable housing.

(c) Establish a “Charter of Rights” for Aucklanders in rental accommodation

What would this look like?
This would be drawn up in consultation with tenants and would cover issues such as tenure, rent and “warrant of fitness” standards. For example Auckland Council could draw up WOF criteria and rate rental properties A to F (as the council does for commercial food outlets such as cafes) and publish the results on-line with listed improvements required as appropriate.
How much would it cost?
No extra cost – to be accommodated within current council work priorities.
Why not leave the market to itself?
Families are at the mercy of “the market” because of the dire shortage of affordable rental housing. The market loads costs onto low-income families whose income is constrained not by the value of their contribution to society but by having their work valued by “the market”. And the situation for families who rent is becoming more desperate as the government evicts families from state houses.
What are the benefits?
Encouraging better housing for families and lower rents where these are desperately needed.

(d) Pressure the government to allow Auckland City to impose rent controls till Auckland’s housing affordability crisis is over.

What would this look like?
Rents in Auckland are too high with families across all parts of the city paying more than 30% of their income in rent. These high rents are caused by a chronic shortage of affordable rental housing across all parts of Auckland. This policy would require the council to set a rentals policy and allow tenants to request a council evaluation of the rent they are being charged. The council would have the ability to set the rent if it is outside the council’s rental policy guideline. This policy could reduce rents in Auckland by up to 30%.
How much would it cost?
No additional cost.
What are the benefits?
This would allow tenants to receive an independent evaluation of the rent they pay and have it fixed in cases where it is too high. This would also drive many “property investors” out of the housing market which in turn would lower rents and the price of houses themselves. Note that close to half all the houses sold in Auckland are bought by property investors rather than first home buyers.

(e) Require all new developments of more than 10 homes to have a minimum of 50% of affordable homes

What would this look like?
Requirements like this are a typical feature of countries overseas where affordable housing is an issue.
How much would it cost?
No additional cost.
Why not leave it to market forces to decide the affordability of property?
The market is the problem. It has produced no affordable houses in Auckland for at least the past decade.
What are the benefits?
Self evident.

ENDS

© Scoop Media