By Ranjana Gupta*
The property market is New Zealand’s largest industry, adding NZ$41.2 billion a year to gross domestic product. But there is a debate over how we tax houses – particularly those sitting empty despite the ongoing housing crisis.
Housing affordability is a concern for both renters and home owners. Last year, one in four rental households spent more than 40% of their disposable income on housing costs, compared with one in five households that were paying a mortgage.
A comprehensive capital gains tax has been ruled out by both major political parties.
While the bright-line rule means home owners have to pay income tax on profits from properties sold less than 10 years after purchase, this still only applies to house sales. What about those investment properties sitting empty for investment reasons?
My forthcoming research looks at the feasibility of taxing empty homes and what I found was a potential source of substantial revenue for the government.
Empty homes during a housing shortage
Around 5% of New Zealand’s housing stock – 95,000 dwellings – were considered empty during the 2018 census.
According to the Empty Homes report, roughly 10% of the empty homes surveyed were intentionally being kept empty, while 35% were empty because they were holiday homes. A further 8% were kept empty for personal use (often as a second home), 23% were empty for renovations and repairs and about 17% were vacant rentals, sometimes due to non-compliance with Healthy Homes Standards. The remaining 6% were empty for “other reasons”, which often meant they were awaiting sale.
It was not clear how much of New Zealand’s housing stock remains in the hands of overseas-based investors after rules changed in 2018 to restrict foreign ownership.
But the National Party has promised to allow foreign buyers back into the property market. Under National’s plan, foreign buyers will be limited to properties over $2 million and will need to pay a 15% tax on the sale price.
Introducing an empty homes tax
My research examines the under-utilisation of property taxes by the New Zealand government.
In the financial year 2021-22, the central government earned 4.7% of its total tax revenue from property taxes, below the OECD average of 5.7%.
But New Zealand is fertile ground for an empty house tax, which would directly impact property investors and those who have the means to own multiple properties.
An empty house tax targets home owners who let a property sit empty for a certain length of time.
New Zealand would not be breaking new ground with an empty house tax. This type of tax already exists in a number of countries.
What’s more, New Zealand has the infrastructural prerequisites needed to implement an empty house tax.
New Zealand has an existing land registry which records essential information regarding all parcels of land, bypassing the need to establish this data or to rely on self-reporting form home owners.
A potential boon for government
Some sort of empty house tax could be a source of revenue for the government, as illustrated by cities and countries overseas.
Empty properties in Paris, France, incur an annual surcharge of 160% of the standard property rates. In Vancouver, Canada, vacant homes are taxed at 3% of the property’s taxable value and failure to pay can result in fines.
In Ireland, the empty house tax is three times the property’s existing base local property tax. And in Melbourne and Sydney, house buyers who leave a property unused for six months face an annual charge of at least A$5,500 (NZ$5,978).
These countries’ responses to vacant properties suggest that high rates and tax penalties steer investors toward more productive areas of the economy - a reason cited by policy makers in Vancouver and elsewhere for introducing the tax.
Following the Vancouver model, an empty homes tax on property in Queenstown could generate $255 million a year.
Time for serious consideration
New Zealand could take one of two paths when introducing an empty home tax.
The first option is to charge a tax of between 200% and 300% of rates, similar to Ireland. Alternatively, we could introduce a tax of 3% to 5% of land value, like Vancouver.
This tax could be tailored to cities and regions, with empty homes in cities like Queenstown and Auckland incurring higher charges than other areas.
The rules could exempt residential and rental properties, with an exception for holiday homes unless they are normally used for Airbnb. People forced to relocate from their residential homes for extended periods due to work requirements could also be exempted from paying the empty home tax.
To ensure the success of the empty house tax, we need to include credible measures to monitor compliance.
The revenue from an empty house tax could then be funnelled into building new homes.
Property investors benefit from New Zealand’s lack of an empty house tax. An empty house is still an asset accruing value, even without rent.
On the flip side, introducing an empty house tax will penalise land holdings for speculation, encourage property owners to enter the rental market – which could in turn increase rental affordability.
*Ranjana Gupta, Senior Lecturer Taxation, Auckland University of Technology. This article is republished from The Conversation under a Creative Commons license. Read the original article.
235 Comments
Empty house taxes might help ease rental availability somewhat, but they don't solve land-banking and land speculation in general. A land value tax that covers basically all land would work just as effectively for reducing the number of houses left empty due to speculation, but would also solve land-banking and promote efficient use of land. It would actually encourage more houses to be built, rather than just discouraging leaving existing houses empty.
It really is impressive how many intelligent people refuse to accept a land value tax would do the job required.
Yet they spend huge amounts of time and effort coming up with other 'methods' for RFRM to capital gains taxes to try and achieve the same outcome less efficiently. It's almost as if their jobs depended on it.
Both are attempting to make better use of existing assets.
A land tax would also tax land with an empty house. Not sure I can agree they are 'entirely different' as they both tax an unused asset. I would prefer a land tax as it has other benefits, one of which is it encourages use of empty sections that could have a house build on them whereas an empty house tax wouldn't. There would also be no need to work out and police rules for what counts as an empty house.
Would be a fairly consistent form of tax revenue too. I think Government tax revenue in 2022 was $110 billion.NZ Land mass = 268,000 km2.
If you levied every m2 of land in NZ you'd end up with roughly $0.50 per m2 to cover the $110b tax. Sure, it's not that simple, some land is govt owned, some is not usable. But even if you were to factor of 10 that, $5 per m2 = $5k per 1/4 acre section. Min wage = $7k per year in PAYE.
Agreed. Hence I applied a factor of 10 to my final figure, implying that 10% of land in the country would be subject to the full burden of tax revenue.
So if you took 10% of the land, and burdened it with the FULL tax revenue of $110b for the year, someone on a 1/4 acre section would receive a tax bill of $5k. Not saying we'd shift 100% of tax burden onto land, but demonstrating how powerful an LVT could be. I'd gladly pay even $10k in LVT for my 1/4 acre section if it knocked out my PAYE.
Nzdan's theoretical tax was based on area, not value of the land. It could have a $0 value, as as long as it had any size at all it would still be subject to taxation. It could also have a $1B valuation on a 1sqm plot of land and only be subject to a $5 (or 50c) tax bill.
The only way to make it worthwhile owning any sizeable piece of productive land would be to significantly raise the price of any produce from that land.
Nzdan has further explained above though, to allay concerns.
Probably 95% of people refuse to accept that a Land Tax would do the job required!
A capital gains tax would make more sense (if you were going to do one of the two) as you actually have a gain to tax, whereas with a LV tax the taxpayer would have to be searching for cash to pay the tax. A taxpayer may have $50,000 in a TD, but 5 years later he/she has no money as it has all gone on LV tax!
The purpose of LVT is revenue gathering, always has been and always will be. Recently people have talked about it encourages land owners to make better use of their land, but mostly the land is actually used for a house where people live. If you want to tax land bankers, target them specifically and not the general population.
Recently people have talked about it encourages land owners to make better use of their land
Great you've latched on to that key part of LVT in addition to gathering revenue.
but mostly the land is actually used for a house where people live
This doesn't mean there isn't still room for improvement, even you use of the word 'mostly' acknowledges that there is in some cases.
If you want to tax land bankers, target them specifically and not the general population.
If done per TOP tax switch this is pretty much what happens, pay some LVT, pay less PAYE i.e. the general population would be better off (so not targeted at all). Losers would be land bankers (so they are targets as you suggest acceptable, landlords, foreign owners).
Yep, i’m more than happy to pay an LVT and get my PAYE restructured from the bracket change. This benefits those who have one property or aspire to own one someday, as well as their children one day, but doesn't benefit those in the 50+ bracket who have multiple properties or anyone with a property portfolio really. They are in it for the gains and profit so they can shed a bit and still benefit. For the farmers etc there can be tweaks done to make it equitable but the key aim is to derail the gravy train of property investment as unproductive capital and steer nz in another direction.
"a taxpayer"
lol. You're clearly referring to a superannuitant in this example, which is 99% likely to be net beneficiary not a 'taxpayer'.
Putting that to one side, if the land tax is such an imposition on that person ($10k p.a.!) then they must have a lot of land in an area that a lot of people can / want to live.
The LVT in that instance is the perfect tool to incentivise them to downsize to something / move to somewhere more appropriate for them.
They simply cannot afford the amenity value they are consuming in that property - most of which will be a function of public investment in local amenities (transport / infrastructure) and / or restrictive zoning.
Some people are very quick to tell young people to downsize or move further out if they can't afford to live centrally.
Well if that advice is good enough for the goose then it's good enough for the gander.
My example could apply to anyone with a home, and many do not have extra savings or investments.
LVT is a tool for revenue gathering, but it's proponents have been adding extra reasons for it in recent years, like your example of literally forcing people downsize. I believe that a person should downsize if they choose to, not because they are forced to.
New Zealand has plenty of land. This should be freed up for housing development, but there are factors at play which appear to prevent this from happening.
but it's proponents have been adding extra reasons for it in recent years
There is nothing recent about the other benefits unless you regard recent as hundreds of years - Land value tax - Wikipedia
I believe that a person should downsize if they choose to, not because they are forced to.
No one is forced to, they will however pay according to their choice to stay or not. How does this belief of yours translate to tenants? Should landlords be allowed to 'force' tenants to leave by giving notice? Should landlords not be allowed to put up the rent if the increase would 'force' the tenants to move house?
Once a land value tax is in place, then there's certainly the option to expand on the criteria.
- Owner Occupied LVT = xx%
- Zoned Resi Empty Land = xx% + x%
- Unoccupied Dwelling LVT = xx% + xx%
One push back is that developers get stung with LVT holding costs. Easy, put a delay in from land settlement for developer to begin consent process. Exempt development from LVT as long as key milestones are met within a realistic timeframe.
As someone who owns an empty house I can tell you it's just not worth the aggravation of renting it out. If you want less empty houses then perhaps restore landlord rights and make it more attractive for them to do so rather than less.
How about tackling the myriad of council regulations and consents that add time, cost and complexity to construction, how about tackling the virtual monopoly on building products? That's the thing with socialists, the law of unintended consequences.
You can do what you want to council tax, I'll either find a loophole or pay up, but I'm not renting that property.
Not everything is about profit. Perhaps having an empty house is about convenience to use as see fit. If purchased in the last few years it has probably made a massive loss and therefore statements in the article such as "An empty house is still an asset accruing value" are indicative of an author with extremely bias views. If I have taken on the risk to buy a second house to use as I please, and accepted the associated costs/risks of higher interest rates, and the risk of the property becoming worth less - on what basis should I be forced to pay an empty house tax?!?
Te Kooti I also have a beautiful house which is sort of by the beach, elevated with ocean views. It's too good to be rented really. I remember the rental agency saying to me that they'd found the "perfect tenants" and did I want to "lock them in". The tenants tore the wallpaper off, they damaged the tiles on the ground floor they somehow damaged the bottom edges of most of the wooden doors in upstairs part of the house. The carpet had urine stains all over the place. There were cigarette buts all over the garden. lots of other little things with boiled my blood. One time during the covid lockdown the agent who was doing an inspection said to me in a kind of nonchalant way "oh did you know that the people that are living there aren't actually on the lease"... My advice is to hand pick tenants yourself. Don't trust agents. Renting a nice house isn't for the faint-hearted.
So it's not really to do with the "hassle" and punitive laws around renting out a property. Bit of a mischaracterization just for you to tack on a spiel about your hatred for socialists.
Unless you're expecting tenancy laws to let you force the tenant to stay in a hotel on a whim when you're in town?
I am in exactly the same situation as you Te Kooti. Renting out our house is just not worth the grief!!!! I totally agree with everything you have said. There is no way I will be taxed on my own house because I choose not to rent it!! This proposal is socialist envy at its worst!
No, it has a distinct meaning in this circumstance. When used together with tax, envy means 'applying to me rather than the working plebs'.
We can all agree that taking near 40% of the money someone works hard for is valid, but charging 1% of the value of a scarce resource being used inefficiently is completely inappropriate.
Ka pai DD. Some people have worked hard, some got lucky and others have inherited homes, that's the way life is. There is an intrinsic value in not renting a place and having to deal with tenants. No one is trying to deprive someone shelter, there are always places to rent. What he is really saying is my empty place would bring the price down if added to the rental stock.
How about we restrict immigration before riding roughshod over Kiwi's property rights?
Teenagers need jobs, and when the youth wage was around they were paid accordingly to the relative skill for said job. Now trolley boys get over $22 an hour to do bugger all and we are supposed to teach kids the value of money, yet we wonder why they blow a lot of their earnings frivolously.
Unfortunately I think we may have to to ride roughshod over property rights in order to stop mass immigration. If the public borders which protect the working class from poverty have been pulled down then maybe we need to pull down the private borders (private property rights) in response until we all agree borders are a good thing (both private and public).
Most people who wanted mass immigration own property/businesses. I say: they wanted immigration, these are their immigrants and they can pay for them.
If the population doubles through mass immigration then land per capita halves. Why should they escape this because of "private property rights" when the halving was their doing?
Until the people who want mass immigration are made to suffer some of its effects nothing will change and mass immigration will continue.
According to the article, Te Kooti;
And in Melbourne and Sydney, house buyers who leave a property unused for six months face an annual charge of at least A$5,500 (NZ$5,978).
I think that's an empty home tax, don't you?
Obviously the Aussie are targeting the locations with the highest shortages of rental accommodation (i.e., where houses are scarcest).
There are many unintended consequences in the capitalist free market and they can cause some major issues such as the 2008 financial crash and It is then left to the public sector to bail the entire system out again. Privatise the profits and socialise the losses is the name of the game.
https://www.merriam-webster.com/dictionary/socialism
Don't think Labour fit the definition of "socialist". Far from it
Rather good, as Stats NZ tells us here. https://www.stats.govt.nz/news/record-number-of-new-homes-consented-in-…
and as The Ministry of Housing tells us here, https://www.hud.govt.nz/stats-and-insights/the-government-housing-dashb…
Me too I have 3 homes so normally 2 are empty at any given time, they are also used by friends and family at different times. One is a apartment next to my partners elderly mother to encourage family to visit and stay when they can. I have 3 car's as well want to tax them too ?? Just another stupid idea get your hands off private property !
I also own an empty house. It sits empty because Labour changed the law and made it illegal to rent it out to anyone other than AirBnB guests. It is not Healthy Homes compliant, but as I lived in it for 4 years and never had a speck of mould in the place, there is nothing wrong with it the way that it is. It also requires earthquake repairs to be undertaken so a long term tenant is not practical. Lastly, I simply don't feel comfortable handing over a house that does not have a mortgage on it (so its a LOT of my own money at stake) to tenants who I cannot get rid of if they don't look after the place.
All of the rental issues we are currently having can be sheeted home to Labour Govt policies. They did this. Why should we be forced to pay for their incompetence?
I assume it's because its not as large a personal exposure to the asset?
At the moment, houses are not a right despite this being a nice socialist ideal. If they are a right then we need to make that law.
If we want to add more taxes on successful people then we should know we are simply arranging deck chairs. France has tried envy taxes and they were pretty net-neutral. Interestingly Macron described the supertax as “Cuba without the sun” and it was cancelled as a bad idea. https://www.theguardian.com/world/2014/dec/31/france-drops-75percent-su…
In fact, I did recently sell a second property. Proceeds were split between reducing my mortgage, some home improvements, and buying shares. If I had a spare property hanging around now, I'd buy more shares. Plenty of companies out there I'd like to own more of.
I'm quite happy with my job, no plans to start a business. I sleep a lot better with a diverse share portfolio rather than a rental property - difficult to diversify an individual property portfolio. And the leverage increases the risk further.
One of the purposes of taxation is to modify behavior, as Beardsley Ruml of the New York Fed described in a speech, "since the end of the gold standard, "Taxes for Revenue are Obsolete". The real purposes of taxes, he asserted, were: to "stabilize the purchasing power of the dollar", to "express public policy in the distribution of wealth and of income", "in subsidizing or in penalizing various industries and economic groups" and to "isolate and assess directly the costs of certain national benefits, such as highways and social security".
Empty houses is just like body fat of human body, if too much of it, you have a problem, if too little of it, you have problem.
tax on empty houses implying there should be no empty houses in this country. just like human body, if no body fat, you die. if no empty houses exists in NZ, NZ will have no wiggle room for housing, and it will be dire for all.
by the way, why do you always tax everything?
Canada imported 1.2 million people last year. Then they think the solution to their rental crisis is to whack more taxes on housing. Australia the same. NZ just aspires to import a million people - nobody really cares if they are being packed 32 to a house, unless the media find out about it.
Maybe a million people over 20 years.
I am very grateful to immigrants, including the surgeon who performed my operation, the nurses who looked after me, the uber drivers who provided transport for me when I couldn't drive, and the fruit and vege shop owners selling their produce at half the price of the usual culprits.
I have no problems with skilled immigration, but your example of Uber drivers is the problem. There are over 100,000 unemployed people in NZ, I am 100% sure most of them know how to drive a car. There are plenty of jobs that immigrants are being brought in to do (drive a car, work in a pizza shop, work in a liquor or convenience store, wash dishes in a restaurant, clean a hotel room ....) that could be performed by unemployed New Zealanders, but instead we pay so much money to them in benefits they have no interest in working. An unemployed person with a partner and 2 kids now earns more on a benefit ($63,000 a year) than more than half of all workers in NZ (the median wage is $61k). Businesses wouldnt have a problem finding workers if people in this country actually wanted to work.
That conversation is about immigration. Not unemployment of NZers who have every right to be in NZ. A lot of the immigrants we get contribute to govrrnment benefits as well, as a lot are lower socio economic. They also contribute to higher infrastructure costs, more traffic, more ques in hospital, larger classes with less teachers, higher crime, more homeless and the list gets larger. Immigration has a huge cost on our disposable income in particular unaffordable housing which is greater then 40% for a lot of people. The right immigrants yes, just not ones that have to stay in houses of 10 or more.
I would prefer paying extra tax, and reduce my housing cost. Tax is nothing compared to that.
Any ideas of how to get them into sustained employment?
Yes, offer them the same pay as immigrants get INCLUDING their residence VISA. That means paying a bus driver over 6 figures because that is what an immigrant bus driver on a pathway to residence gets. To put in in a way you may understand, the wages are the rent, the residence visa is the massive capital gain that makes the rent look like peanuts in comparison. Kiwi's on a benefit only get the peanuts as they already have residence/citizen VISA's.
You are like so many in that you do not comprehend the public cost of your private cheap uber, takeaway or coffee.
Not to mention the 900k overseas students currently studying in Canada. You can bet money that most will not leave and many can automatically bring over siblings, parents, grandparents, aunts and uncles the milkman and even the dog walker.
The Canadian immigration policy (which is essentially let anyone who can get to the border, or receive a job offer, be a permanent resident.) is an unmitigated disaster. All the while a housing crisis second only to NZ keeps getting worse.
How many is to many..? Talk of 40k houses in Awkland. Smells like speculation at the expense of the population. If its really that many then clearly an empty house tax could change behaviour.JA smiled and waved and thought it was a non issue.
https://www.newshub.co.nz/home/politics/2021/08/jacinda-ardern-not-conv…
That disincentive may only be $5-10,000 for the first year after you deduct off the $15,000 - $20,000 required in many cases to meet basic healthy home standards installing insulation, new heat pump(s), extractor fans, sealing any gap bigger than a 10c coin.... And then deduct off the cost to have to get an accountant to do your tax return because you're receiving rent approx $1,500. Disincentive down to $3,500 - $8,500. Then deduct any extra maintenance items which only become an issue because a tenant asks for it. I doubt I could be bothered personally for an extra 2 or 3K in my pocket.
Just implement a universal, unescapable land value tax. Allow pensioners to delay payment until death on one property, with back collection upon death. 1-2% of all property, used to fund infrastructure. This isn't hard, everyone who doesn't advocate for LVT is just grifting for a cheatable system.
Landlords avoiding tax are no different to the French nobles who refused to pay tax to the French State in the 18th century.
That is then basically an inheritance tax. But it isn't that simple because it would affect people taking out reverse mortgages in retirement to release equity. I don't know any countries that tax on land except from some in Europe, inc Russia and Singapore, but they are very different countries. NZ doesn't even have a stamp duty, capital gains tax on property, vacant home tax, AirBNB etc. Nor do we rate landlords a commercial rate on their properties, despite them owning homes and renting them out as part of a business. Some councils do now do charge commercial rates on homes used as AirBNBs, but most don't.
Essentially you want to increase the holding cost associated with building new houses. The standard process is generally: Buy land > get plans drawn up > get engineering designs done > apply for building consents > consult local iwi > amend designs to satisfy local iwi > apply for resource consents > amend designs to comply with terms of resource consent > engage builders > demolish existing dwelling > wait for materials to arrive and builder availability > build the houses > get council sign off.
the whole time you want the developer to pay a vacant home / land tax. This sounds like an excellent way to increase house prices?
TOP's policy of 0.75% annual tax on all urban residential land is nutty socialism at the extreme. A person with a city home on a $1m section and a beach house on a $1m section (both acquired over a hard 40 year working life) would attract total annual tax of $15,000 pa for the retirement years. Super is a pittance when you finally get it so lets clobber the old people with another tax. ACT's policy of removal of wage indexing for annual Super adjustments prevents pensioners from voting for them too.
Rarararara something about taxing to death someone's life long family home filled with memories. Who cares if we have 1 pensioner per quarter acre surrounded by subsidized gold plated services they rarely use, and when they do use it *swish* out comes the gold card. Rates bill comes in? No worries, here's a rebate. Sounds very socialist to me.
Why would you wish such a thing! I'm all for the government pension, just not in its current form where those with little live a miserable life on it (as you say), while those with a lot claim an equal amount no questions asked (you know, the ones that use the gold card on the Waiheke Ferry).
Imagine if we determined that 1/3rd could live comfortably without the old person's benefit, and we redistributed those savings to the other 2/3rds? Stop treating it like a loyalty scheme.
Most people with $2m of property that are currently retired did not pay $2m for that property, more likely that they paid $200k. That's a cool $1,800,000 of land value gains that they did no work to grow; I'm sure they'll be able to cover that $15,000 p.a. with their unearned land value gains.
And TOP's tax policy includes reducing income tax, as a revenue neutral tax switch. That means anyone from then on will be keeping more of their hard 40 year working life earnings (hardly socialism).
Keep in mind that superannuants are also able to defer payment until sale of the property/disposal of their estate, so it won't impact their day to day life.
Most people hanging out on a financial news site are "nerds" (for economic policy, personal finance, investment advice etc.). TOP has interesting economic policies that apparently appeal to financial news site nerds.
For myself, I think that housing is one of the single largest problems in NZ for a variety of reasons and TOP is the only party that seems interested in addressing fundamental changes to housing that might actually improve the situation notably. I'd happily vote for a bigger party if they were bringing in effective policy to solve housing in NZ.
Yep, I was going to say that too - in other words, I'm that kind of nerd. Seems the other kinds of nerds who hang out here are those interested in the RE sector more exclusively. Makes for interesting point-counter-point discussions.
Wouldn't it be great if the percentage of TOP-leaning interest.co.nz bloggers was 'matched' on party vote count on election night?
Probably dreaming, but it won't deter me :-).
If you feel that people who educate themselves and enjoy open-minded, educated discussion on key economic issues involving the future of our country are ‘nerds’ then may I suggest you return to the cesspool of mainstream media where you sound like you regularly frequent.
How can they cover that when many would have little earnings, and effectively it is just taking retired peoples savings. As you said it is value on paper that they had no part in earning. Most people don't actually benefit from property prices going up and house price bubbles. I am sure most would far rather pay a capital gains tax when selling the home, even though any CGT would not apply to the family home. Maybe such a land tax should apply to any home that is not the family home.IMO we need to have a higher income tax rate like Australia already does for a start. There is no real downside to that and only affects a small % of people who can already afford to pay it.
Like Australia? The first $18k over there is tax free. Then a 30% tax rate applies to incomes from $45,000 to $200,000. That's lower than NZ (which is 33%-39%). And Australia has salary sacrificing which allows people to usually get up to another $50k of that salary tax free. And you can still deduct off investment property rental losses against personal income, along with a multitude of other expenses. Can't deduct much of anything in NZ.
Then there are self managed super funds, where you can stash your investments and only pay 15% income tax, and 10% capital gains tax. The super rich simply use trusts and offshore companies to move assets out of reach of the taxman. Its not a coincidence that Gina Rinehart, the richest Australian, is resident in Singapore.
Since the author also mentions National’s proposed reversal of the foreign buyer ban, I think it is worthwhile to zoom out from the short term sugar rush of some extra tax revenue and look at the fundamentals of what may occur long-term as a result.
I am very concerned that by allowing foreign buyers to compete with New Zealand residents to purchase property worth over 2 million dollars, it will exacerbate the issues of the cost of land, gentrification, and further concentrate the wealth of the nation into the hands of the few through re-inflating the ponzi.
Firstly, the cost of land. In the face of the worst property affordability crisis we’ve ever experienced, why would you increase demand, especially in a small country only populated by 5 million people? For example, this will push prices further out of reach for those wishing to purchase land to farm. The land will still need to be farmed, but fewer and fewer New Zealanders will be able to afford it. Thus, we will work the land, but have little chance of owning it… neo-feudalism.
Secondly, in many areas worldwide, gentrification due to rising property prices and speculation have resulted in lower income earners being forced out from communities they grew up in. This form of inequality and exclusion leads to the erosion of community cohesion. What has so far occurred in places such as Queenstown will be just the start of a cascade of gentrification is some of our most desirable areas.
Thirdly, the intention of selling our country to rich investors over time is the open desire for wealth to become ever more concentrated in the hands of the few and an attempt to re-inflate the ponzi. It’s open capitulation to greed. We all cynically understand that our capitalist system is already set up to benefit the rich, so why accelerate the problem? Concentrating land in the hands of the wealthy has been done before. The Latifundia system in Ancient Rome led to the displacement of small farmers and impoverished rural populations, leading to social instability. When has growing inequality ever been good for a society in the long term? Because that’s what we’ll get in exchange for a some meagre tax cuts.
National’s intention to sell swathes of New Zealand’s property should concern us all, but especially the voiceless, future generations yet old enough to realise that they’ll end up squabbling over less desirable tracts of land among themselves and pay a fortune for the privilege.
In a world where millionaires and billionaires vastly outnumber the entire population of this country, this hideous policy warrants more than just a shrug of the shoulders or a flippant comment or two about National being a party of landlords.
It should bring up serious discussions about which direction we wish to take as a nation and the well-being of society and future generations. Currently, we’re meekly giving up on the future of our country and we’re doing it without a fight.
"It should bring up serious discussions about which direction we wish to take as a nation and the well-being of society and future generations. Currently, we’re meekly giving up on the future of our country and we’re doing it without a fight."
I agree with that sentiment which is why Labour/Greens need to be booted out for at least a decade. I care a lot more about their unmandated undemocratic racist policies & actions than the noise of property market.
In a democracy voters can still change political parties and policies. Without the democracy that our ancestors fought & died to keep NZ is lost.
I care a lot more about their unmandated undemocratic racist policies & actions than the noise of property market.
The 'noise of the property market' ensures my kids will probably have to work their entire lives and give up on having kids of their own, just to be able to own their own home. That is if they are lucky enough to be able to make that choice.
How do these "racist policies" specifically affect you?
Hang on. I have three kids, now married adults with their own kids. My kids studied at school, went to school every day. went to uni or trades every day (with student loans - since paid back by them), got jobs, worked hard every day, got married to boys who went through the same path and still work long hard hours at higher paying jobs because of their qualifications and work ethic (two doctors and one Quantity Surveyor). All three have their own homes with now low-modest mortgages and each have an investment property rented out. The oldest is now 39 the youngest 32. They know NZ Super is below the bread line and KiwiSaver at 3% employer contribs pathetically inadequate so that leaves only property (residential and commercial) to secure their future retirement. Countries like Canada, Australia, USA might have capital gains taxes but they also have incentivised alternative Super savings programs that are at least or more attractive than property, providing a balanced investment framework. NZers have no choice. It's property or poverty in retirement. NZ's housing system isn't broken, it's retirement savings system is.
They are obviously smart. Why is following the sheeple their only option ? Thats a very narrow view of what's out there. Sure it's not all tax free, but who cares ? I'm mid 50s and have a business that pays me to not show up. I own no property. I actually like working which is unfortunate for my staff I sold some of the business to staff, and they run it, and benefit from it.
two doctors and one Quantity Surveyor
Are you unaware that these are above median jobs? Got married so 2 x incomes. Notwithstanding that, did any receive help in the form of a gift or guarantor for their first property? Is this in Auckland? If each of your children have 3 children, do you think those grandchildren will be able to do the same?
Thing is, macca - not all people have the requisite intelligence to become doctors and quantity surveyors. But, the general labourer - who say, drove the roller to build the roads; or who attends to the needs of the elderly and inform in rest homes; ...(I could go on forever) - deserve the ability to own their own home and raise their families and be comfortable in their retirement too - don't you think?
Many many people are working 40 hours a week (some well over that) and still unable to live comfortably.
It's not just about studying hard and long, and having a good work ethic.
I am hearing a lot of stories of young homeowners doing it so hard now that I think it is going to be unsustainable for them to have kids. What a cock up.
Re your point about racist policies, the penny has just dropped for me. I was thinking that the stories of long wait times and our health system being in crisis must be just exaggerations as I recently had occasion to use it and was pleasantly surprised how quick cheap and easy it was. Then I remembered I am recorded as being part Maori. I regard that as being even worse than ACT policy to sell our hospitals.
I'm not part Māori and similarly had (more than one) occasion to use our health system recently and was, like you, pleasantly surprised how quick, cheap and easy it was.
If the penny dropped for you after that, it had nothing to do with your race.
More likely to do with your postcode.
Great initiative if it takes the pressure off ERs and GP/PHOs. It's also available for all Community Card Holders, regardless of race (they are distributed on an income threshold basis). Many Māori and Pasifika families cannot get registered with a GP (that's that postcode lottery problem) - and of course it is primary health care providers that often provide the forms to fill in for obtaining a Community Services Card. Hence, as I understand it the reason many Māori and Pasifika families (although likely to qualify on the income threshold basis) do not yet have one. My guess is that Te Whatu Ora likely have this research and want to be able to encourage those without GPs to go in to see the local pharmacist (who will likely also provide the CSC application at the same time).
It's an absolute crisis in many of our ERs - absolutely anything that gets patients out of ERs and into primary health care (even pharmacists) is super worthwhile. Child illnesses in particular, as often minor ailments left unattended end up in hospitalisation. Many parents are unfamiliar (have never heard) what whooping cough sounds like in comparison to a chesty cough. Pharmacists are ideal in this regard as they can distinguish. Same goes for skin ailments - clean wound vs infection - bug bite vs eczema, etc.
It should bring up serious discussions about which direction we wish to take as a nation and the well-being of society and future generations. Currently, we’re meekly giving up on the future of our country and we’re doing it without a fight.
How about a vote on the policy Sam, oh wait, we are in a few weeks. National have clearly outlined their pro-property policies and if elected, have a mandate to deliver on them. (I actually don't agree with the FB policy ftr)
The Nats / ACT are just riding the wave of ABL(anyone but Labour)...if it was a closer election,there would be more scrutiny on their property policies,but the majority are thinking they will swallow a rat and let it slide and the rest are being seduced by a tax cut we can't afford and that the Nats can't pay for...
I dont see why people should be penalised for owning houses that are now illegal to rent out . Those that do not comply with Healthy Homes Standards because its not financially viable to spend money on them, and those that have been removed from the 1-12 month temporary rental pool. Change the law back and those properties would be occupied. Labour also removed all the self contained flats that arent consented as separate dwellings from the rental pool. So if anyone is wondering why there is a rental crisis in places like Queenstown they only have to look at the Labour Govt rental laws.
How much is it costing to bring properties up to spec? Presumably the yield on doing the work is huge, compared to earning zero rent on the whole property. Otherwise, the property can be sold to someone who will either do the property up, or live in it and improve as they go.
You would only spend the money if you planned on it being a permanent rental. If you plan on selling it in the future, or its awaiting earthquake repairs, or you want to use it occasionally as a holiday house, you wouldnt bother spending anything at all. Or you might be planning on knocking it down and building something else. But while you are sitting around making up your mind what to do with it, it sits empty simply because Labour made it illegal (despite being a perfectly sound home). It could be being used as a furnished short term rental for 1-12 months to seasonal workers but now you cant get rid of tenants, so anything over 90 days and you have a permanent tenant on your hands.
My dog died, car broke down, sick kids and I put my back out and STILL I paid tax on the money I made at my job.
Suck it up, taxes are made to direct society, not care about everyone's personal circumstances. I don't know if vacant house tax is a good or bad, however....
We have a national trade deficit, we can't do well as a country relying on speculation, eventually it is going to burn the country. We need to enhance productivity and reward enterprise. How we get there is debatable but at the moment it feels like the two main political party's have no plan.
It's a tricky one. I do think it's reasonable to remove downright unhealthy homes from the rental pool but perhaps the current rules don't perfectly capture that ideal. In the same way, we all want tenants to feel secure and be able to have some kind of stability in their lives, but it's also right that there should be a path to deal with terrible tenants.
Looks like the pendulum will swing back with the next government - I hope they don't throw the baby out with the bathwater.
If it's that hard, just give up. Sell the property and move onto something else. By the way, you could have just shortened your comment to this:
"You would only spend the money if you planned on it being a permanent rental and were not speculating for capital gains".
Got nothing to do with capital gains. It used to be my personal home. Its what to do with it once I had moved out of it that is at issue. Lots of people are in this situation - they have a ex-home or holiday house that could have been rented out, but its easier to just leave it empty.
The only interesting numbers in this story are the six categories, which I presume came from a survey answered by the owner, with no independent checking of the data.
I have an empty house, why, first reason, in case a family member needs somewhere to live, second reason in case the house I live in burns down, third reason, not wanting to have a large amount of money sitting in a bank account at any bank, have owned it for more then ten years, and I've only slept there one night. I dont even consider it an empty house, the power is connected, we mow the lawns and have a cup of tea when we visit.
When should an "empty home" be taxed?
- If it's a holiday home ? is there a minimum/maximum usage?
- a place used to rent as Airbnb? Again minimum/maximum usage?
- an empty house awaiting to be sold (which can take months in some cases)
- a home while the owner is away on holidays? If so for how long?
- what if the owner lives in two separate homes?
- what about couples coming together to live in one place whilst the other one is empty?
- what about a home being empty because it's being renovated? How long before it's being taxed?
- what if the home is a rental in between tenants? Again, how long before it's being taxed?
There are many other examples of homes not being used 365 days per annum, for various reasons, I can see a huge can of worms being opened.
To ensure the success of the empty house tax, we need to include credible measures to monitor compliance.
The revenue from an empty house tax could then be funnelled into building new homes.
It sounds more like the revenue from an empty house tax would pay for some more government boffins to monitor compliance.
The problem isn't "empty houses", it's population overgrowth. This is a problem deliberately created by politicians, that was never mandated by NZers. If there is a tax to be paid, it should be levied on the policy makers that cooked up this s storm, with their ignorance!
Of all the parties contesting the election, I'd have thought Te Pati Māori would have had a specific immigration policy - but no/nada;
https://www.maoriparty.org.nz/policy
Kaitiaki of all people should know our land, water, oceans and coasts can't sustain many more people.
Riiiight. Another University Lecturer clown who because overseas countries do certain things, we should as well. Here's a thought for you. The properties that are vacant are OWNED by someone. In NZ we have property rights. Just because someone chooses to let a home they own be vacant, for any reason, doesn't mean the Government should tax them for exercising that absolute right. What should happen, is the Government should slash its expenses. Then the need for more revenue would fall away. I reckon the Government should make a flat income tax rate on University Lecturer's of 80%. Just because they have a job at a University.
I think so. I'd be happy if the Government funded shuttle vans to drive around picking up all the beneficiaries for some community work. The alley way down the road from me needs a good water blasting. Maybe give them some paint and a brush, give the corrugated fence a spruce up. Sweep the footpaths. Pull weeds.
We don't want the Government to necessarily slash their expenses. We want property to be another proxy at which taxes are paid, reducing the burden on wages/salaries.
Then if we want to go down the road of austerity, we can reduce income taxes and keep property taxes in place.
You seem to have read the article and decided the author is proposing this tax to increase tax revenue. It seems more like the author has proposed the tax as a way to change behaviours in relation to housing supply and demand.
And in relation to "rights", at what point does your "right" to leave a house vacant interfere to a person's right to shelter?
Only according to the UN everyone has a right to shelter CDub. However, there is no right conferred on everyone to make other people pay for that shelter. So my right to my property is absolute and their right to it is nil. And no other person has any right or title to it. If you think otherwise, perhaps a trip to North Korea is in order for you, you'll find it more to your liking. And hasn't the Government (both central and local) done enough to screw up house pricing?
Lets say your right to your land is "absolute", whatever that might mean. Your rights to what you can do with your land are not. We restrict plenty of land uses that can have a negative impacts on other in society. Holding land for no productive use could certainly be seen as having a negative impact on others in society so I don't see why we shouldn't at least discourage it.
Nz's housing isn't broken, it's retirement savings system is broken. Property is the only way to avoid poverty in retirement in NZ. Canada, Australia, USA don't rely on property, have fair capital gains taxes and have incentivised retirement savings systems that are more attractive than property and lead to a dignified retirement financially speaking. Introduce CGT but also fix our retirement savings system to the same EET system as those countries (which we used to have) instead of our backward TTE system and the housing problem will dissipate overnight.
An explanation of EET vs TTE systems;
I'd say that the empty houses tax in Vancouver, Sydney and Paris have more to do with very wealthy overseas investors leaving houses empty. I'm not sure that the issue with empty houses has the same foundation here.
The Labour govt has made it quite risky for small investors to rent houses out. You cannot move an awful tenant out. Some might say yes you can if you follow a long expensive process. But perhaps you actually can't in many cases. I recall a case reported in the media where tenants didn't pay rent for over a year and the judge for the case allowed the tenants to stay if they paid back a small weekly amount of the several thousand dollars owed. Even though the tenant didn't pay the rent the landlord couldn't give them notice.
When you have a system where a tenant can cause extensive damage to the house, not pay rent and is still not able to be evicted then renting a house becomes risky for small investors but not so risky for rental agencies with large lists of current tenants with proven track records of payment and law abiding behaviour.
I've noticed a few articles in the media recently that on the surface appeal to left wing sensibilities, (land tax, wealth tax, etc) but if you look a bit closer the authors are shilling for large corporate rental owners - those entities that can afford to pay new taxes and have the staff to deal with new regulations.
I imagine that having a few large corporate rental companies makes it easier for the govt to organise giant rabbit hutches for the prolertariat to exist in, while at the same time getting rid of all the small rental investors who probably vote National.
Once you have the rental market controlled by a handful of corporate entities, they can set their rents at whatever level they like. And there will be no alternative to paying it, bar Government housing. You end up like Germany.
https://www.dw.com/en/germany-housing-is-almost-unaffordable/a-66432276
I agree with this. In my quiet Remuera street there is already a $3-4m house that has been empty for sometime. Was a nice family home when the previous owners had it, but was sold to a "foreigner" that spends no time in NZ. I'm told many see it as "better than money in the bank". This is a standard family home on 700sqm, so not a development plot etc. Weeds are out of control and its quickly starting to look derelict. This isn't the only house in the neighbourhood like this. Why do we want more of this? Not only does it take a house out of the pool stock its not good for the community either. I appreciate I sound like a moaning NIMBY, but what do we achieve by selling residential family homes to foreigners that have no interest in living in them or tenanting them?
I think people are mistaken into thinking that a $3 - $4m house is not worth worrying about because it's far out of reach for the common man. But what happens, is when you have a shortage of $3 - $4m houses people buying in that brackets potentially lower their expectations. This can have a ladder effect all the way down the property market where demand from above encroaches, and outbids.
JK's Parnell mansion reportedly sat empty for five years;
And it recently sold for a loss of $7.2million.
You can't go wrong with property - lol.
Yes, if the socialists were genuine they would be taking beneficiaries and refugees into their own homes. Or offer to pay an empty bed tax. What is the difference between owning a house with bedrooms you dont use to house anyone, and someone owning a house lot of empty bedrooms that arent used to house anyone? If I owned a 5 bedroom place and just let one person live in it, thats worse than owning a 2 bedroom place and leaving it empty.
And garages can easily be converted to house people - sure it costs a lot of money, but why should owners be able to use their garage to store a car or gardening gear when it could be housing people? Everyone with a garage should be forced to upgrade their garages so they can get renters in, or pay a garage tax if they want to still use it as a garage.
or pay a garage tax
Rest easy KW, my LVT is already taxing the very land that garages are sitting on!
It's only a matter of time before the owners do as you suggest and convert them to a higher value usage because it makes economic sense to them. Pity about the rules that get in the way of them doing that easily though eh.
Everyone is entitled to their opinion. I think everyone agrees there is a shortage of rental houses. Governments of all colours in many countries not just New Zealand try to address the issue by taxing the providers of rental housing. This solution does not work in UK, Canada, Australia, nor France. I wonder what would happen if there was some sort of incentive provided to create rental homes. Tax breaks are given for the like of Steel and Aluminium smeltering in New Zealand and it works. There is no shortage of those two metals?
I think everyone agrees there is a shortage of rental houses
I would add 'affordable with respect to incomes'. Those countries you mention have external driven population growth too. Until you control for that, you cannot rule out taxes as not working/helping. I agree supply could be helped, but demand can change faster and should be considered.
There is an incentive to "create" rental homes. It's called mortgage interest deductibility on new builds. But I'll concede, a new build is not really designed with rental durability in mind. 50% of my first home had plywood internal linings. My current home has timber sarking boards under the gib. In both places a tenant would struggle to put a fist through a wall.
Maybe the Government subsidizes local manufacture of plywood internal panels, solid core doors etc for new builds destined to be rentals. Potential export product keeping the value add local, creating jobs etc.
Nobody is creating affordable rental homes though. And that is the problem. The Labour tax law has meant that the supply of cheap housing is rapidly disappearing while expensive housing is rapidly increasing, so renters have no choice but to pay much higher rents. As an example, a 1970's cross lease 2 bed unit, one of 2 or 3 on the section, with a garden and garage rents for $450 a week in my area. A brand new 2 bed unit, one of 6 or 7 on the section, with no garden or garage, rents for $550 a week. There are now hardly any older units available to rent, but a lot of brand new townhouses - so renters now have no choice but to pay an extra $100 a week for somewhere to live. This is why rents are going up (on aggregate) as the type of rental property changes.
Tax them and land bankers also put in place a sales tax of .5% on any property sold and put money made from this into building social housing fund with low rents. It is a crazy situation people living in cars,two families sharing house as cannot afford rent.keep ban on foreign buyer we need to lower house price’s not push them up
I'm in favour but it would be a nightmare to establish a definition what exactly an empty house is.
- If someone retires and decides to go travelling is that an empty house?
- If someone in NZDF is told to go on deployment to Bongobongoland is that an empty house?
- If a house is part of a deceased estate that's taking time to be settled would that be an empty house?
- If a house is remote or rural and no one wants to live in it or it's used as a shears hut would that be an empty house?
Generally I favour just relaxing zoning for both urban dedication and suburban expansion.
I thought it was the private sector that built houses. Is the private sector not capable of providing apprenticeships to grow the workforce and increase output?
The Government is subsidizing training and apprenticeships for construction, what more do you expect? Cindy on the end of a hammer? Was bad enough watching John Key try to nail a post to a board on his campaign trail -> https://imgur.com/9M2KqSs
https://www.tec.govt.nz/funding/funding-and-performance/funding/fund-fi…
I couldn't follow the logic nor the numbers. I wasn't helped by the confusing drafting. For example - a proposed new tax would 'exempt' residential and rental properties (which is, actually, almost all properties), but with an exception for holiday homes UNLESS they are normally used for Airbnb. Does this mean holiday homes are the exception to the exemption (which means they'd be taxed)? And why does Airbnb matter? Surely if a property is being used for Airbnb, it's not vacant. Is Ranjana pushing for a vacant house tax on properties that aren't vacant? Perhaps her definition of vacant is the problem. Another problem is her analysis of types of vacant properties amounts to only 89% of the 95,000 total. Where are the other 11%? This is important because I can't calculate who will be forking out the $255 million in extra taxes every year. Nor is it clear why they should.
Another basic flaw in her logic leaves me thinking she is actually a fan of more taxes and has crafted a problem around this 'solution'. Is her problem that the Government needs more taxes? Or is her problem that we have a housing crisis (which is her purported concern). Or is it that housing costs, generally, consume too large a share of disposable income? Ranjana says 25% of renters pay more than 40% of their disposable income in rent. Or, put it another way, 75% of renters pay less than this. Same with owner occupiers. Does such a large proportion paying less than 40% of their disposable income on housing mean all is well?
Let's zoom in on what her preferred solution is. I have made some assumptions because Ranjana's rationale and data is so opaque:
Ranjana says we have 95,000 vacant properties. She wants the Government to tax some of these properties (looking past the justification for this). But I think she also doesn't want to tax properties that are holiday homes, second homes, undergoing renovations (I assume these properties will cease being vacant when the renos are done), and 'other' (it's assumed these are vacant pending sale). Using Ranjana's figures that leaves 16,150 properties. This figure could be too low because the aforementioned analysis leaves no classification for 11% or 10,450 houses. But Ranjana wants to extract $255 million from the owners of properties that are vacant without a good reason. You could call this group the 'core' vacant properties. As it's difficult to know what an average value might be for this cohort, doing a very simple division of $255 million by 16,150 properties = $15,790 (rounded). An alternative approach would be to apply a 2% tax to an assumed average unit value of $800,000, which comes in at $16,000 each, per year, which is very close to my first figure. Using the Vancouver model (which Ranjana seems to like) would involve a $24,000 bill - but this would overshoot the revenue target that Ranjana has set and land at $382.5 million. None of these figures has any regard for the ability of the owners to pay such a tax, which is another major flaw in her argument.
The figures change again if the missing 11% are factored in.
As a policy professional of over 20 years, I assert there are several response options for each problem that Ranjana seems to be concerned about. If we accept that her primary concern is the housing crisis / cost of living, etc, perhaps she should consider the benefits and funding avenues that may be available to incentivise the owners of vacant properties to open them up to others.
Lastly, I have to ask, who peer-reviewed her paper? I'd love to have a closer look.
Articles published in The Conversation are not peer reviewed in the same manner as academic journals (multiple blind peer review) . It's more like an academic short-piece blog with a more short-form peer review process;
https://theconversation.com/nz
See 'Editorial policies'
There might have been an associated masters or PhD thesis, or perhaps even a long-form academic journal article. But it's a bit late for me to check tonight!
Very good questions though. I too found the 'narrative' (the way the article was structured) confusing. Didn't do any of the check-sums you did however.
If you locate the article on the link above - you will then be able to correspond with the author directly via email, I believe.
Looks like a solution looking for a problem. I am sure that there is a correlation for thr healthy homes act and the growth of social housing and emergency housing.
Grandma's house was rundown but watertight and would have been rented but with rules on heat pumps and insulation cannot be rented. Instead of being rented for a period while things are being sorted out they have to remain empty.
The lower quality, low cost rental are also caught up in this so are upgraded and rent pushed significantly above what was currently charged.
National in opposition said I would repeal health homes and interest deductability on investors.
National has made no announcement on healthy homes and is only walking back the tax changes.
I think you need to first address why a property may be empty in the first place.
Maybe a lack of suitable tenants, no real consequences for bad tenants.
Compliance costs healthy homes etc, the Labour government has had an ongoing war with the residential property business sector.
Holiday homes that could be let out on a short term basis, put off by oppressive council bed taxes.
If the answer to a problem is to TAX it you just know it is a con.
What I do with my properties is my business, not the governments.
Governments over the decades have introduced all kinds of oppressive taxes, only to find they cost more to administrate than they collect. Because the public are a lot smarter than politicians and civil servants.
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