Labour get’s something right

Well roll me in brown sugar and dunk me in your coffee – Labour have got something right.

They probably read my blog this morning. But all the same – the point they make is the same that I do – a cap on mortgages will have disastrous consequences.

Lending restrictions being considered by the Government could threaten desperately needed new housing developments, Labour’s Housing spokesperson Phil Twyford says.
“Debt to income ratios that would limit the amount a home buyer could borrow to 4.5 times their income would undoubtedly drive many people out of the market.

“Everyone knows Auckland has an acute supply shortage with an estimated 40,000 shortfall of homes. The unintended consequence of debt to income ratios could be to jeopardise new developments and make the shortage even worse.   

“Since comments by Reserve Bank Governor Graeme Wheeler yesterday, developers have inundated me with concerns that people buying new builds off the plan could be forced to withdraw, which could force developments to fold.

“A typical Auckland family only has an income of $81,900. With an income ratio of 4.5, that is only enough to buy a $369,000 home. However, median house prices in the city are now $812,000 – that leaves them almost half a million dollars short.

“Yet again home buyers will bear the brunt of National’s refusal to take significant steps to address the housing crisis. It shows the Government is out of touch with the needs of most families,” Phil Twyford says.

I’m no fan of the way the Government has dealt with Auckland’s housing issues. The whole debacle is centred around stupid planning regulation imparted on Aucklanders by a totally inept Auckland Council.

Fixing supply is the only way to solve the problem. That ain’t gonna happen if caps are placed on lending.

And the financial fallout – caused when property developers go bust because projects complete without settlements – will be significant.

Playing with demand is a waste of time. A better idea is to stomp on Auckland Council and release more land and build more houses.


-Labour party


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  • Observer

    Fixing supply and/or reducing the inward migration target from 50,000 a year to something more manageable given the existing housing stock.

    Agree that capping mortgages is a bad idea.

  • Tom

    I would have thought that if you have a debt to income ratio of more than about 6 if interest rates rose anytime to say 8% you would be seriously stuffed.I know when I got a mortgage 4 years ago they based what I could borrow on both values and my after expenses income. That was with ASB.

  • Gaharis

    I always thought that when lending most if not all banks limited the lending to a % of your income less an allowance for living expenses and other commitments anyway? I assume what is intended is a lower % imposed by the Reserve Bank?

  • OneTrack

    If we have a current shortfall of 40,000 houses, where are those people living right now? In other words, it sounds rubbish so where did that number come from? The Labour party?

    • Miss Phit

      Good point. If there is a shortfall of 40000 homes with an average family being (lets say 4 – easy maths) thats 160000 people wandering the streets homeless.

      Hmm I know there is a begger/busker problem in some areas but not like the whole of Taupo and rotorua and tokoroa moved onto the streets.

      My BS alarm is sounding off.

      We all know the answer to the housing issue is supply.

      The only people who can fix that are the councils who free up land and issue consents etc.

      So why arent there people protesting at the doors of councils?

      But lets be blunt. Its not all councils, there are so many subdivisions in the chch area at the moment so that cant be the issue (although the prices are up there) and other centres. The main culprit is the Auckland monster council, sitting on their hands hoping that the problem will magically get fixed. I wonder are they broke and dont have the money to even make a small difference? Have they missmanaged their financial money pit to the point where there is nothing left but diverting attention onto other things?
      So now they cant afford transport without tolls? What the hell is going on in those offices? Id love to see the books (the real ones not the junk we get spoon fed) and see just how flush or flushed the council really is.

      Im guessing if Phil the Goof gets in he will hide the truth to keep his mates happy and blame the govt.

      I do place some blame at the feet of the govt. They know what is going on. They know how to fix it (hell everyone knows). But they seem to lack the drive to actually get in there and do something to help us all out.

  • jaundiced

    Taking away the ability for people to buy a house does not solve the problem.
    1. It only takes first home buyers out of the market, not those who are out-bidding them at auctions
    2. They still need a house to live in – we need to increase the number of houses being bought, not less.

  • Richard McGrath

    There’s no need for an apostrophe in the thread title.

    • Kapow!

      Thank you. Just thank you.

  • Oh Please

    Surely this can only benefit overseas buyers who are not restricted by this rule. Bad, bad idea.

  • contractor

    Auckland house prices rose 89% during Labour’s 9 years in power, whereas during National’s first 6 years prices rise less than 30% and by now certainly hasn’t anywhere nearly matched the rate of increase under Clark.
    So it had next to nothing to do with National’s super city, or anything else National has done.
    Immigration worries me too, but again data does not lie. Over 20 years the average net outflow of NZ citizens was about 20,000, peaking at 40,000 in 2012, whereas in the past year the net inflow of Kiwi’s was nearly 2,000. Plenty of this would have been Aucklander’s. So Kiwi’s leaving masked the decades of low land development and building.
    During Clark’s reign the average annual net immigration was actually higher than under National when the net outflow of Kiwi’s is factored back in.
    Clark appointed Judith Tizard as associate (?)minister assisting Clark herself on Auckland issues, then made Tizzard Minister for Auckland. Between the two over 9 years they did nothing whatsoever to increase the slow house supply rate.
    National is doing pretty well in nearly doubling the rate of house building, but no doubt it could be better in theory but that’s life, who is perfect?
    I agree playing with demand is the wrong end of the stick. The biggest long term danger is to in the short term pop the building boom, which is really was to do. We actually need high prices because the costs of land thanks to the RMA and other restrictive council regulations including zoning, plus the high costs of land development and construction a large part of which is RMA and council driven, make development risky.
    Labour say they would embark on an old fashioned govt building programme. Good luck. Guess one road blockage to that. They’d have to bring in a heck of a lot of foreign workers and companies for 5-19 years, house them, them send them back. I’d not hold my breath that they could pull that off and the costs, and govt debt or tax increases would be huge. Labour’s plan certainly would be very good for their arch enemies, all businesses associated with land and house construction and furnishing would make heaps of money thank you very much.

  • contractor

    Adding to my dissertation below. Labour’s big building programme would cause inflation, interest rates, and the NZ dollar to soar, all of which would hurt everyone including exporters. Dodgy economics, but who can be surprised when it comes from with the left?

  • Whitey

    I’ve often wondered just how stupid an idea has to be for Labour to recognize its stupidity. Now I know.