Xenophobia is ugly and embarrassing

The concern over home ownership in New Zealand is valid, especially since statistics indicate that home ownership in New Zealand has fallen below 50% – the lowest since records began. House prices are simply too high and the necessary wages to finance a mortgage too low. Something has failed.

However, instead of turning to our failed tax and monetary system and looking for disincentives to land speculation, we resort to blaming foreigners. At which point accusations of xenophobia come into play.

I refer to this piece by Duncan Garner: LOOK AT THIS! THIS IS WHY HOME OWNERSHIP IS LOW

Garner claims that:

12% of all homes in Auckland are being bought by people living overseas

This is misleading. It does not necessarily mean that homes are being bought up by ‘foreigners’. How much of the 12% are NZ citizens living abroad? Without defining ‘peple living overseas’ its difficult to attribute the 12% simply to foreigners. Additionally, it means that around 88% of homes are owned by New Zealanders. Thats a significant majority.

Garner goes on to insist that:

we desperately need decent and reliable statistics to show just how many houses in NZ are sold to overseas speculators.

Again, ‘overseas’ is not indicative of ‘foreigner’. The conflation astounds me.

Agreed, speculation is undesirable and particularly harmful in widening economic inequality. However, speculation should be the target, not ‘foreigners’. Even if the 12 % of homes owned by people living overseas are owned by foreign speculators, it does not mean domestic speculators have an insignificant effect on housing prices. We need statistics on speculators in the market, irrespective of their nationality.

Jamie Whyte criticises Labour’s economic policy as failing to discourage ‘rentseeking’ (speculation) and ‘crony capitalism’. The argument in short: if a government causes losses to accrue to the wealthy, it has to compensate for those losses with taxpayer money. Labour are not alone here. National also have the system set up so that tax revenue is redistributed upwards just using different kinds of subsidies.

Of note, Labour (and the Greens) advocate for a capital gains tax (CGT), yet appear to wilfully ignore that this device was in place in other countries and did not prevent the GFC in 2008 that was largely the result of a property boom.  To extend on Whyte’s point – taxing capital gains creates obligations between the government and the parties subject to that particular tax – in order to ensure gains aren’t moved offshore or that investors don’t stop investing here, those subject to the particular tax will need incentives, usually in monetary or ‘regulatory’ forms.

My point is that if any political party is serious about tackling speculative behaviours that affect housing affordability then land value tax (as a single not an additional tax) must at least be up for consideration. We need innovative solutions. David Cunliffe (Labour Party) stipulated that in his economic upgrade speech yet offers only a CGT.

But moving on, Garner’s boldest claim is to:

ban foreigners from buying old stock, build new houses if you want to invest here – that’s what happens in Australia. It’s time to stop the madness

Garner’s effectively suggests that we signal to foreigners that we in New Zealand don’t think they should buy homes where we want to live, they should instead build homes where we don’t want to live.

All those accusations of Māori separatism, come home to roost in the suburbs of the middle class.

A further problem is that xenophobic policy is dangerous for diplomacy. New Zealand has adopted declarations that create obligations to avoid discrimination and to uphold human rights. These declarations may only amount to soft law (not legally binding), but our actions do indicate our commitment to shared principles across the globe. They speak to our moral character. Xenophobic policies damage our international character.

There are strong arguments [from cosmopolitanists] for principles of distributive justice to apply at a global level. In context of this post, if we consider how we did not create the land, our claims on {absolute) ownership are questionable. Arguably, our only legitimate entitlement to it, is to share in its wealth. It might follow then, that those not born in NZ or who don’t fit the legal requirements for the arbitrary notion of ‘citizenship’ should still have every right to purchase land in New Zealand. Afterall, our birth place is contingent.

In my view, any governance model, must ensure that the communities affected by land ownership are properly compensated for that resource being taken out of the commons.

I  appreciate that some Māori might be uncomfortable with supporting policies that give foreigners access to land, particularly, if there are no safeguards around land that might be in dispute or customary land. Disputed and or customary land is a different case, they are about just possessory claims and ought to be dealt with separately from the general residential housing market.

Garner concludes that banning foreigners from buying homes in New Zealand is:

…not racist. It’s common sense. Let’s put New Zealanders at the front of the queue and help them, before it’s all too late.

If we want to make it easier for New Zealanders to buy homes in the areas they want to live, then tax the land and untax productive incomes.  The mere suggestion of banning foreigners is both ugly and embarrassing,  does not resolve the pricing issue and is most certainly not common sense.

Advertisements

5 comments

  1. Taxing the land seems reasonable at first sight but all sorts of unexpected ramifications present themselves. For example, a working family might work all their lives and pay off their house only to find the area they live in has risen in desirability and they now pay as much each week in tax as they were paying for their mortgage. CGT is not the only part of the package for fixing the housing problem. Part of the cure , I feel, is removing houses being investment. CGT would help this but rent control and tenant rights would also be a major step in the right direction. Land Tax and second and extra properties I think would be a reasonable option though.

    Liked by 1 person

    1. Thanks for your comments! But I have to respectfully disagree.

      In my view, the arguments for LVT are far more equitable than those for CGT. LVT removes taxes on productive incomes, so families receive the full reward of their labour. Additionally, many LVT proponents suggest the revenue collected through LVT be redistributed in the form of a citizens dividend or UBI, which home owners (families) could use to pay towards their LVT.

      When people purchase properties they obtain exclusive use rights. This is not a problem, but the community should be compensated for the privilege of holding that land out of the use of the commons.

      If the area has risen in desirability it is because taxpayer dollars have been used to create infrastructure and goods that make the area desirable, yet the family receive the benefit simply by holding the land. While many other taxpayers receive nothing, and are often the very people priced out of the housing market that they contributed value to.

      LVT is considered by many economists to be the ‘fairest tax’ and is also considered the most effective way to disincentivise speculative behaviour while simultaneously incentivising innovation and higher wages.

      Like

  2. LVT is an interesting subject for debate. Property speculation isn’t just a one way street, sometimes it fails and speculators lose out but I get the gist of what you are getting at. Although I have not looked into it fully, LVT could possibly have the same distortions high rates on farm land are having in Auckland which is the break up of the land into unproductive lifestyle blocks but yeah…interesting topic.

    I do find it amazing that there is so much stick poking going on towards the Chinese in particular regarding the property market. The media have certainly latched onto the whole Asian invasion thing. Sad really.

    Liked by 1 person

Comments are closed.