Housing crisis: Govt won't set target for 'affordable' housing

Grant Robertson won't set a target on how affordable homes should be, saying the recent changes to landlord tax rules and the bright-line test are designed to put "downward pressure on the price rises that we've seen" - without committing to bringing house prices down, because he doesn't want to 'undermine' owner-occupiers' 'security'.

"Downward pressure will mean that we don't see those kinds of price rises that we've seen over the last few months," the Finance Minister told Newshub Nation on Saturday. 

On Tuesday he, Prime Minister Jacinda Ardern and Housing Minister Megan Woods announced landlords soon would no longer be able to deduct interest costs to reduce their tax bills, and an immediate extension of the bright-line test to 10 years - effectively a capital gains tax if you sell an investment property within 10 years of buying it.

The new rules apply to any properties which change hands from Saturday. 

"What we've seen over the last few months are completely unsustainable house price rises," Robertson said.

"And so we want to make sure that we're doing something to act against that. In the end, what happens with house prices is not just a product of Government policy. It's a product of things like what the interest rate is, how much supply we've got - and we are adding to that through this package. 

"So what I do not want to see are the kinds of house price rise as we've seen in recent times. What I do want to see are more first-home buyers involved in the market."

First-home buyers typically don't have as much cash to throw around as investors. And in recent years, house prices have risen much faster than incomes - nationwide, the median house price is now seven to eight times the median household income; in Auckland, it's over 10

"I don't think that's acceptable," said Robertson. "I do want to see that come down, but I'm not going to put a particular number on it today, particularly because this package is just one part of the kind of work that we need to do in the housing market, that local Government needs to do in the housing market. 

"That has to be done by all of the people who participate. So eight to one is a level that I know we can't sustain and have an affordable market. We do want to see that come down."

Grant Robertson.
Grant Robertson. Photo credit: Newshub Nation

But not necessarily at the expense of homeowners. 

"What we do have to respect is that for the vast bulk of New Zealanders, the only home they own is the one that they live in. It's a very important part of their security. I have no desire to undermine for those people, that security. 

"What we all know, though, is that the number of people who actually are getting a chance to be a first-home buyer, to be an owner-occupier has been compromised by the fact that we've had tax loopholes, the fact that we haven't built enough houses over the last few years. And so we are taking action to deal with it.

"But nobody should ever try to claim that there's a silver bullet for the housing crisis or that any one initiative is going to solve this or that it's going to happen quickly. This is a big, complex, long-term challenge, but this package will make a difference."

Included in the changes this week were raising of the spending caps for First Home Loans and First Home Grants for first-home buyers in most parts of the country. While the move undoubtedly made more homes eligible, there have been suggestions the caps are still too low. 

Robertson said they're based on the same data used to calculate the previous caps.

"We have to find a way of judging where those first-home loan grants and where the caps come in and we use the CoreLogic data, the data we used for this was actually from March this year. And that data, you know, tells us what the median of the lower quartile is. So this has always been for starter homes. These are for first homes and this is based on actual data. 

"Now, theoretically, we could put the limit to $1 million, but what that would mean is we would have people in situations where they simply would not be able to service the mortgage. We don't want to put them in that position. So we're using a measure based on real data. And this is one that I understand for some people might not get them the home that they want or that the home that's immediately available to them."