Critiques of Govt’s contentious housing package raise questions about whose advice was sought

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”.

Reddell  concluded:

“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.

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