Monday, 21 January 2008

Alliance: "no answers to housing crisis from Labour and National"

The Alliance express disappointment with both major parties over their failure to address the housing crisis. (1)

As they point out, the affordability isn't going to be solved through tax cuts, which will favour the wealthy. Tax cuts will actually drive the prices up further, in the same way that building more roads simply leads to more congestion - the cars that congestion is keeping off the road simply appear to fill up the space. It will simply put more pressure on the market.

The Alliance suggest the utterly sensible idea of a capital gains tax on properties other than the family home, home loans for low income families and an expansion of quality state housing. (2)

The first proposition is so absurdly uncontroversial that it is unbelievable that a fringe party is advocating it. I don't think it goes far enough, frankly. I can't see any reason to exclude the family home - and I'm speaking as a home owner. If your home gains value and you make a profit from selling it, I don't see why that extra income shouldn't be taxed. Perhaps there is an obvious reason - other that lumpen bourgeois opposition to a tax that would effectively target their interests. If so could someone explain it to me?

The idea of a tax on capital gains tax will pain property investors and speculators. Fine. They are contributing to the problem and anything that hurts them is a Good Thing.

The second and third proposals will hurt property investors and land-lords from the other end, by reducing the pool of renters and forcing them to fdrop rents to remain competitive. Again, this is a good thing. It will have a further advantage of driving the quick-buck cowboys out of the property market, leaving it open to land-lords who are interested in the long term. So again, not a negative.

It will be said that these ideas will be 'inflationary.' I'm tired of inflation being held up as a bugbear for every idea put forward to make society better. I am staunchly, despicably middle-class. I'm the sort of person who should be horrified at the thought of inflation eating away at my savings. I'm not. The social costs that go with low infaltion are a far greater evil, to my mind. The super-rich might think differently, but they don't live in the same world as the rest of us. The great trick that has been played on middle New Zealand is the suggestion that there is a shared concern between the super-rich and the middle-class. The latter lose far more than they gain, by living in a society riven with poverty, violence and crime.

Anyway, the measures proposed by the Alliance will probably not cause inflation in the house market, as the increased demand from home owners will be balanced with the fall in demmand from proerpty investors. Certainly, it is impossible to argue that the status quo has not had an inflationary effect on house prices.

1 - 'Alliance says no answers to housing crisis from labour and national," press release by The Alliance Party, 21st of January, 2008. (http://alliance.org.nz/blog/2008/01/21/alliance-says-no-answers-to-housing-crisis-from-labour-and-national/#more-137)
2 - ibid.

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