National has done something so that it looks like it's doing something about Auckland housing. But it reeks of third term-itis when you pretend you're fixing a problem when you're merely tinkering
"So where's the good bit?" Guyon Espiner asked a RNZ guest this morning in relation to National's not-new non-capital gains tax reforms announced over the weekend. The answer is hard to pin down, not because there isn't some value in the changes, but because National's wriggly, squirming messaging makes it so darned hard to understand.
National announced two major changes. First, from October, anyone selling a house that they don't live in within two years of buying it will be charged a capital gains tax, whether they intended to flip it or not. Second, non-resident foreign buyers buying homes here will have to open a New Zealand bank account, and therefore get a New Zealand IRD number, making them subject to the same rules.
For National and its supporters, "the good bit" is that it makes them look as if they are doing something about the Auckland housing crisis without actually doing something to annoy all those National voters with a rental property or two.
Its inaction thus far has become a potential vote loser, especially with younger and older voters. So this is about optics, and little more.
Why little more? Because it really is the least you could do and still look like you're doing something. To be fair it's not nothing, but it is minimal.
The two year boundary won't interfere with the plans of many investors. Sure, it reins in the flippers, but there seem to be fewer of them these days. And given that the capital gains in Auckland look likely to stay high for several more years at least, what's two years between voters?
The requirement for non-resident buyers to have a local account and tax number has more merit and could be quite a clever start. My guess is that it will make some think again, but I don't imagine many folk in Asia – apart from the out and out money launderers – being turned off by that.
What's interesting is that Key is arguing this approach is better than that dumb foreign buyers register because it's not just collecting information, it's doing something. The flaw in that argument of course is that it's an implicit admission that you're acting before you have the evidence, so can hardly be evidence-based policy. When for months you've insisted you don't need to know any more about foreign buyers because you know they're not the real problem, if you then act without evidence it's just showing the world that you're kow-towing.
But let's cut to the chase: This isn't about identifying a problem and fixing it. Debating just how much or how little difference these tweaks will make it missing the point.
If National wanted to tackle Auckland's property problems, getting serious about making sure speculators pay their share and turn around the declining rate of home ownership in this country, these policies are not what you'd do.
Instead, this is what you do when you want to be seen to be doing something.
But the bad bit for National is that their messages are now in a muddle, and like the surplus before it, that starts to raise questions about their economic management.
You can't argue with any credibility that a tax on capital gains (which Key did today), is not a capital gains tax. You look to be splitting hairs when you admit that Auckland had a housing problem but not a crisis. And it starts to stretch belief when you say 'it's all about supply', then the big two changes you make are designed to impact demand.
That looks like third term-itis, when you know what you should be doing, but you do something else because you're boxed in by all those promises you've made and bottom-lines you've drawn over the years.
This is when you risk looking self-serving and tricky, because you start doing only what you think you politically can get away with, rather than what you (and voters) know you should do.You start to look tired and calculating and less trustworthy.
Politically, it raises an interesting question for Labour, which has been backing away from its capital gains tax policy. These tweaks had fleshed out more of how a CGT would work, exempting inherited property, the family home and so on.
Remember Key's question to Cunliffe during the last campaign about CGT? Labour got into a tangle about who it applied to, sales of homes after a parent's death etc. Now National has drawn those lines for them, and so if Labour stays within them can deflect any criticism from National. Labour can even argue it is only tweaking National's "tweaks" and so extending this tax into a fuller CGT is not a new tax either.
Hey, if Key can say this isn't a new tax, then so can Little when he's adding to it further down the track.
So there are potentially good bits in this for both sides of the argument. But the biggest point is that there's not much good in it for young people trying to get ahead in Auckland. They still are waiting for serious action.