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May 7, 2007 | by  | in Opinion |
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Editorial

When a wise man once said that the home is where the heart is, it’s unlikely he considered modern day New Zealand. Never before have so many Kiwis paid so much for houses, the nesting place for families and students. Current housing prices have swollen to the point that they are considered the second least affordable in the world. While this bubble is creating a boom for existing homeowners, it’s arriving at a heavy cost for the rent paying student. Flatting costs are also the highest they’ve ever been. That’s largely the consequence of low to middle quality housing getting snatched up by investors faster than they can be built. This creates higher than existing demand. Driven largely by the baby boomers this wave is a relatively recent one. Just six years ago the median house price was 3.75 times the average household disposable income, now it’s 6.3 times that average income.

While this swell is historic, it’s all the more astonishing considering the values our current “centre left” government is supposed to be based on. Since the Rogernomics reforms of 1984, at the delight of the real estate market, there has been little regulation imposed on the housing market. This classic right wing ideology, of letting the market do its own thing seems to be well demonstrated in the politics of Helen Clark. That’s a disappointment for me, because markets don’t consider things like fairness, justice and equality only dollars and cents. The values of liberalism are supposedly built on the foundations of regard for the poor and downtrodden.

It’s in this context that Victoria University has announced plans to raise a three tower block of hostels. According to Victoria, it’s a way of reducing the accommodation crisis facing Wellington. Last year there were 2,000 more applications for hostel beds than they were able to provide. While addressing supply, a real solution, one which will allow first time homeowners and flatting students’ financial relief needs to be built upon Government policy.

Redefining what’s left and right, or in this case replacing “heart” with “wallet” has allowed New Zealand to be one of the few countries without a capital gains tax – a regulation which just might correct our unfair situation.

This ties into our totally deregulated financial market, where people can borrow up to 100 per cent of a house’s value.

A capital gains tax discourages investors from buying up investment properties because then they are taxed less than other types of investments, allowing housing prices to stabilise. It’s a idea which is gaining support with one in two Kiwis thinking it’s a good idea provided it’s excluded from first time ownership.

How high will rent costs increase if our current situation is left untouched? That answer depends on a market which is unaccountable.

When will our Government put concern for housing prices on the agenda? In light of recent support for intervention I think that time has arrived. When first floated in 1967 GST was very unpopular, but found favour 20 years later. For the sake of exuberant prices and our social fabric – economic regulations – need to be reintroduced as a solution to our accommodation crisis.

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