Some four years after this government promised to address the housing crisis, they have announced their new policy. What they have done, against their earlier promises to leave tax levels alone, is to increase the bright-line test to 10 years and remove interest deductibility.
This means that owners will be taxed a greater amount; landlords will likely hold on to houses twice as long and increase rents to cover higher costs.
Tenants will have a longer wait to buy their own home, because more of their income will go to rent than saving for a deposit and fewer investment properties will be available for sale.
If you’re a first home buyer you’re eligible for special assistance, such as accessing your KiwiSaver and a small grant, but there is a cap on the price you’ll be allowed to pay for your first home. Here in Tauranga it can cost no more than $525,000, or $600,000 if you build a new house.
There is currently a shortage of building products; builders are struggling to get timber, nails and other key items that go into new homes, so building a family home will be just as difficult as finding an existing house within the cap.
Here’s another thing: home buyers are competing with the government as they buy up existing houses for social housing tenants, who pay just a quarter of their income on rent. Of all the houses that Kainga Ora owns, more than 2000 of these are priced over $1 million each.
I’ve had a number of constituents ask me why they are bothering to maintain good credit ratings and excellent rental references when they could just be housed in luxury properties courtesy of the tax payer.