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A ‘housing deal’ that brings together politicians, legislators and experts to propose binding recommendations for future housing is “long overdue,” says ASB senior economist Mark Smith.
In the latest from ASB Economic weeklySmith says that with our politicians “the needs of the country should come first, rather than using housing as political football and a way to score points.” ASB is New Zealand’s second largest mortgage lender with a home loan book of $ 62.236 billion at the end of September.
Smith has come up with a number of suggestions to address controversial housing issues.
He admits that “this is not an exhaustive list of considerations” and that not all of the above suggestions may be politically acceptable.
“However, it is better to highlight the problems and look for possible solutions instead of throwing this into the too-hard basket and watching the housing crisis intensify.”
And Smith has some reasonably direct messages for our politicians.
“The blame game must be stopped, and group and personal interests must be parked. A housing agreement is long overdue, to bring together politicians, legislators and experts to discuss what could be done. The recommendations of this should have more force being consigned in the basket too difficult by the central and local government, “says Smith.
On the policy approach, he says that a “coordinated and multifaceted policy approach” will be needed to tackle the housing problem, covering both demand and supply aspects.
“Proposed Movements to Add Housing Prices in [Reserve Bank’s] The monetary policy mandate may not go a long way in practice according to the Reserve Bank of New Zealand, but it will promote transparency and a more considerate view of how the housing market impacts the outlook for monetary policy.
“Reimposing the loan-to-value (LVR) restrictions from next March appears to be long overdue and it is good to see banks playing their part in curbing some of the riskier lending. The RBNZ should also be prepared to further expand its suite of policy tools to help control demand. “
Smith says the government has an important role to play on both the supply and demand side of housing.
He says the tax system needs reform to tilt incentives toward increased income, employment and productive investment.
“Investors’ housing tax treatment will need to be reviewed, taking into account capital gains or land taxes to help level the playing field or encourage efficient use of land available for residential use.”
To address housing affordability, Smith says the country needs much, much better construction of affordable homes.
“Boosting productivity in the construction sector and the provision of affordable housing must be a top priority.
“Regulatory reform can help here, as can increased supply-side grunts through increased employment, skills and training in this sector. But make no mistake that this will be easy. Raise productivity. across the economy it has proven to be much easier said than done, and experts have generally been puzzled as to why New Zealand’s productivity performance has been so persistently poor. “
Smith says there should be a nationwide conversation about how many people NZ needs and adopting a population policy given the important implications for the provision of housing and infrastructure.
“Should New Zealand’s population be 5 million, 10 million or even 100 million people?
“A discussion is needed on immigration environments.
“About two-thirds of the nearly half-million gain in New Zealand’s resident population over the past five years comes from net immigration, compared to about one-third since the 1960s.”
The current border restrictions provided an opportune moment to assess how well the economy and the housing market will fare without more people arriving, Smith said.
