Talkback lines and social media ran hot with outrage over the $180,000 income threshold for KiwiBuild buyers, but the Government needed it to be that high to avoid dumping houses into the market and driving down prices. Nearly 6,000 buyers applied for the KiwiBuild ballot on the first day, which would soak up three years of production. Dame Margaret Bazley’s review of the Russell McVeagh's sexual assault cases exposed by Newsroom will be released later today.
The dirty little KiwiBuild secret
Voters were surprised yesterday the Government has set $180,000 as the upper income threshold for KiwiBuild first home buyers, but the $650,000 price in Auckland meant it had to be that high to ensure enough buyers for all the 100,000 houses in 10 years.
The dirty little secret is that house prices are too high for most first home buyers to afford and the only way to solve that any time soon would be to drive land prices significantly lower, which would be politically unacceptable for those who vote. Older property owners vote at much higher rates than younger renters, even though the number of young renters is becoming demographically and politically significant.
As Thomas Couglan reported for Newsroom Pro yesterday, data from Statistics NZ’s Household Incomes Survey shows there are just 79,100 two-person households with an income between $97,600 and $188,899 living in homes they do not currently own. These are three of the top four income deciles in New Zealand. A full 174,500 two-person households not currently in their own home will miss out.
If Twyford chose to strip out those earning $142,800 to $180,000, which roughly equates to the second highest decile of household incomes, he would reduce the cohort by a third to just 52,500 households, potentially leaving nearly half of his 100,000 proposed builds struggling to find buyers (although a number of single-person dwellings will also be built).
This is all because the Government will not sell land to developers for less than market value. In fact, its current Treasury-driven rules for land sales say the Government must maximise its sales price. Sources close to the development community tell me Treasury is driving a very hard bargain that is actually driving up land prices even higher in the Northcote development currently being marketed.
The irony of a Government programme aimed at improving affordability becoming the vehicle for the Government to drive up land prices in Auckland cannot be lost on anyone.
The brutal truth of the political economy is that no politician wants to say they want land prices to fall, and even if they did the current rules on maximising land sale prices make it difficult for the Government to engineer a land price fall. Essentially, this stalemate can only be broken when young renters vote for parties and policies that have an avowed policy of driving down land prices.
The policy mix for that would include a land tax across all residential land that would drive down prices immediately, a Government intervention to fund infrastructure that councils won't fund for their own political reasons and changes to the Resource Management Act to free up development in cities. None of the major or minor parties support that. Young renters are set to have to wait for up to 100 years in Auckland for their wage growth to catch up with the flat prices that today's politicians say they want.
Meanwhile, nearly 6,000 home buyers registered their interest in KiwiBuild's ballot for homes by last night, which would be enough demand in one day to soak up the number of KiwiBuild homes planned to be built within the next two to three years.
Russell McVeagh review due
An independent review of how Russell McVeagh handled allegations of sexual harassment and assault at its firm is set to be released later today.
Newsroom has followed - and reported on - the allegations closely since we first broke the story in February.
Amid concerns the review will gloss over the seriousness of the allegations and fail to prompt real change, Newsroom's Sasha Borissenko sets out the four main points Dame Margaret Bazley's review must address.