So what happened to “go hard, go early”? Does anyone expect house prices (which have risen more than $100,000 since early 2020) to start falling?
The Ardern government’s housing package aroused curiously mixed reactions, hardly any of them providing a glimmer of light to would-be first-home buyers that house prices will be falling any time soon.
From one side, the warning came that rent controls could not be far behind. From the other, “market forces” and the evils of neo-liberalism had at last been corralled.
Over on the Left, Chris Trotter sees a housing crisis ripping apart the country’s weakest and most vulnerable communities.
“While the detail of the Labour government’s housing package has been sufficient to unleash the very worst impulses of NZ’s landlord class – whose screams of rage and wild threats of social vengeance have pretty much confirmed the rest of NZ society’s worst fears concerning‘property investors’ – it is the rank insubordination of the nation’s elected leaders which most rankles neo-liberalism’s true believers”.
Those “true believers” are the key figures of the NZ Initiative. And its verdict on the housing package?
“Muldoonism is back in NZ politics. It is a morass of ad hoc interventions and spiralling public debt”.
Beyond these reactions, the government was quickly alerted to concerns that the housing package would raise rents. The Beehive spin merchants moved to cool the perception and at her Monday press conference Ardern was busy ruling out rent controls.
So where does that leave those who believed that the government would call a halt to the rent rises which have lifted the national median rent from $290 a week in 2008 to $400 in September 2017: the point at which Jacinda Ardern declared there was a “housing crisis” and promised to deliver 100,000 houses under Kiwibuild.
Perhaps because she wasn’t keen to be reminded of that, Finance Minister Grant Robertson drew the short straw to defend the housing package on the weekend TV chat shows. (Housing Minister Megan Woods may have been relieved to have been left largely on the sidelines).
Robertson, normally a slick performer in front of the cameras, was far from convincing in trying to persuade viewers the housing package would kill off all the nasty speculation that has put house prices out of reach for all but the luckiest first-home buyers.
Where the Left had expected the government to put the boot into the “landlord class”, there was nothing much for that school to celebrate.
Reviews of Robertson’s TV performances were hardly flattering. One-time Reserve Bank chief economist Michael Reddell observed:
“What I found most striking was how this very senior minister, now with 3.5 years in office under his belt, floundered when asked about the effects of the government’s measures. It wasn’t, apparently, for him to say what the effect on house prices would be.
“Not only that but officials had apparently offered quite a range of views, (if so suggesting they didn’t really know either). He didn’t know what the effect would be on private rents either.
“This was, we were told, ‘highly contested territory’. Really all he was willing to say was that any effect on house prices would be to moderate the recent pace of increase, which he kept calling ‘unsustainable’ – without apparently recognising that things that are unsustainable typically come to an end anyway”.
Reddell went on:
“If you were a serious government, mightn’t you have adopted a package that you – and ideally your officials too – were confident would lower both house prices (actually the bundle of the house and the land under it) and private rents? After all, New Zealand real house prices have more the tripled in the last 30 years, and yet houses are little more than a combination of land (abundant in New Zealand), labour, and a bunch of tradables materials (timber, taps, pipes, gib board etc). General tradables inflation has been – as the Reserve Bank often points out – quite a bit lower than general CPI inflation for a long time. There aren’t any natural obstacles to (much) lower house prices. Just policy ones”.
“It really was a poor performance by one of the government’s most senior ministers”.
He saw Robertson’s performance as a heavy dose of the politics of distraction,
“ … while further messing up the tax system and the housing market itself.
“ Ardern and Robertson have held office for 3.5 years and now have a parliamentary majority that – for good or ill, per the NZ system and its limited checks and balances – would allow them to do almost anything they wanted. But they refuse to do anything that would, with confidence, lower house prices and rents, or to even suggest that lower house prices would be a desirable outcome. There are words for that sort of political betrayal. Mostly not terribly polite ones”.
ACT’s David Seymour slammed the housing package for what he called the “surprise attack” on residential property investors.
“The announcement that the so-called bright line test will now extend to 10 years was not only predictable, but predicted”.
Predicted by whom? Well, none other than David Seymour .
The more intriguing aspect of the extension of the bright line test is whether it came from official advisers in the Treasury and Inland Revenue. There has been plenty of speculation in the coffee bars close to the Beehive of anger and dismay among senior government officials as the government turned elsewhere for advice.
On this point, Chris Trotter was adamant :
“With a firm resolve, unprecedented in decades, Labour politicians were insisting that their bureaucratic advisers implement their policies. Not advise them as to whether their policies can, or should, be implemented, but simply do as they were bid”
If this were the case it opens up the question of just how the Ardern government formulates its policies.
Certainly Ardern seems to have moved into her own particular style as the Covid-19 crisis evolved.