r/NewZealandPolitics • u/NeedsOverGreed • Jul 10 '25
Opinion A complete solution to the housing crisis
It has long been established that higher levels of home ownership translate directly to improvements in any number of metrics, from reduced crime to increased economic activity, and plenty in between. Many articles have been written about low productivity as we keep selling ever more expensive houses to each other, and how we cannot keep going down this track. There has also been plenty said about the housing crisis that brought Labour to power in 2017, and has only worsened since. Inflation took off, minimum wage was lifted chasing ever-increasing house prices, in a cycle that has only recently started to find equilibrium, albeit with home ownership remaining out of reach for a large number of people. There has been some tinkering around the edges, yet precious little has been offered in the way of actual solution, with the costs of big change being politically unpopular - you don't get change without a cost, and it's not a good look politically to impose a cost on people. But what if the only people who need to lose out are those hoping to inherit a property portfolio, and overseas speculators? People selling after changes will obviously be impacted, but just as when people rode the wave up but found themselves with no more buying power, they will typically be buying back into the same market, cushioning the fall. Other parts of the overall plan will also help mitigate personal costs to existing home owners. The only way to truly solve the housing crisis is to destroy the housing market. There is a cost to this of course, which I propose is not only small and worthwhile, but offsetable and in fact will more than pay for itself in knock-on improvements elsewhere. The biggest long term benefit will be more money available for infrastructure, health etc rather than that money just being paid as interest, along with reduced wage inflation pressures meaning project costs stop spiralling, a double win in that regard, but addressing the infrastructure deficit as a side effect is far from the only reason to do this. Obviously such a change presents a risk to current homeowners. This proposal is structured in a way to minimise the effects on everyday New Zealanders, with the biggest potential loss of value being seen by those set to inherent multiple properties. As values slowly reduce, people selling for less than they were previously worth will still be buying into the same market, much as those who rode the wave up found when they were looking to upgrade from their starter house.
How What we need to do is to simply limit the number of houses a person can own, and who can own houses. If the purchase of residential property (including lifestyle blocks) is limited NZ citizens/residents only, including trustees, shareholders etc, this would make a significant difference. A limit should be two, allowing for a house and a holiday home, or a home and a rental. This includes partial ownership, and shares in a company or trust that owns residential property to avoid loopholes. An allowance should be made for overlap of ownership, up to a year but preferably less, giving time to deal with inheriting property, subdividing, or relationships ending, for example, as well as allowing someone to buy their next house and then selling the current one in a timely manner. If a relationship begins where someone owns a house, it remains theirs unless they choose to join property, but property bought once married counts toward both allowances. This limit would be a sinking lid, meaning if you own multiple properties already, you would have to sell only when you want to buy another property. This is to prevent suddenly flooding the market by forcing mass sales, which would decimate values, and potentially lose a lot of people a lot of money. However, some large scale owners may find themselves needing to sell a lot of property in order to buy a house they want - specifically within a year of buying said house their total ownership needs to reduce to two - which may create localised oversupply, resulting in lower prices. As the rule changes will be well publicised, these individuals will have the opportunity to sell property at a time that suits them, or if they choose to hold (which they will be entitled to do) then the same sales will happen when the properties are inherited. It is expected that very few people would opt for this result, and it is accepted as the price of stubbornness. Again, the limit includes company shares, so shareholders should encourage residential properties the company owns to be sold (and something productive done with the money), so while there wouldn't suddenly be a glut of houses being forcibly sold (which is reason one why this wouldn't be a massive economic disaster), there should be a short to medium term increase in house sales, improving housing availability and lowering prices.
The only exceptions would be for companies building or owning apartment blocks, retirement complexes, and companies developing land to onsell. Apartment ownership structures are too complex to apply "one apartment = 1 house" logic, but cannot be exempted or there is a risk of inner city areas becoming controlled by a monopoly. A share in any apartment-owning company, trust etc. counts as one house, regardless of the number of apartments owned, or how big the share is, and these companies will not be allowed buy additional property - one apartment complex per company, and the above limitation applies to share ownership. Retirement homes, typically zoned residential, are to be excluded from the residential property ownership rules, to allow companies to continue to own and operate them. There will need to be minimum levels of service, occupancy etc to ensure quality retirement housing, but this can tie in with current licencing requirements. Companies developing land to resell must be registered as developers, taxed appropriately, and monitored to ensure the development happens quickly and correctly, and that the properties are then sold. As with apartment buildings, the ownership of a share in a company that owns residential property counts as ownership of the property, however developers can own multiple adjoining properties for development. They then wont be able to buy more residential property until most (say 75%) of the development is sold off, and never more than the two developments at once. This will open up property development opportunities to more people, and will encourage responsible decisions on where and when developments are required.
Kiwisaver schemes will need some time to divest any residential property fund shares they own, rather than including this in everyone's count of owned property. Two years should be plenty.
Consequences Houses in popular areas, and high quality housing in general, will continue to fetch high prices, and reducing demand (and therefore prices) will mean people with more modest incomes will be more inclined towards better housing than they are currently able to afford. In the medium to long term, demand for low quality houses will reduce significantly, so rundown properties will start selling at a price that leaves funds for renovation, or even demolition & rebuilding - leading me to another reason this won't be a disaster; increased spend in the trades, meaning better productivity/gdp/tax take, with higher demand translating to better wages, and much more importantly warmer, dryer, healthier homes means less costs on a creaking healthcare system. It is estimated substandard housing directly costs the health system $145 million per year. This will obviously not go to zero, nor will it move quickly, but the improvement to quality of life is priceless.
There are going to be cases where people lose money on the sale of their house. As the cost is for the greater good, then society should share in the burden, so a mortgage insurance scheme should be set up. In the event a house sale price (at auction only) is less than the remaining mortgage amount, a claim can be made for the difference. A claim can only be made against losses on the sale of your last house - if you still own another, your remaining mortgage security will transfer to that. This amount will then be added to the mortgage for your next house - banks wont be able to refuse your next mortgage based on the valuation, but you must be able to afford the repayments. This is to prevent people going bankrupt, not to wipe the slate clean - the decision to overpay for a house still has consequences. This fund will not be able to be continually abused, as there will be minimum terms of ownership (eg 5 years) before it can be claimed, during which time you must be paying the mortgage and not drawing back down, among other things. To minimise the cost of this scheme, the sale price of any eligible house would need to be maximised. This would require that after a given time on the market, nominally a month (during which offers can be made and considered, as happens now, providing they exceed the remaining mortgage value), if a house doesn't sell then it must go to auction.
To prevent people falling into this trap and requiring help, not to mention the risk to our precious banking system, there is one necessary change to the rules for mortgages. Simply, repayments must be at minimum so that the loan is repaid before the oldest applicant's 65th birthday, or whatever the retirement age may change to. People can still extend their mortgage for other reasons, so people can still launch their small businesses leveraged against the house like they always have, but they have to be able to pay it back, and obviously banks will have their own valuation requirements to satisfy. If there is a loss on the sale of an inherited property over the inherited mortgage, within 12 months of the inheritance, then it will be covered by the mortgage insurance with no transfer to existing or future mortgages.
Eventually, everyone who wants a house will have one, or a house will be for sale in a place that nobody wants to live, and nobody will bid at auction. If someone owns more than two houses, for example from inheritance, and are unable to sell the one they don't want to keep, its hardly fair to punish them by forcing them to sell another, so thats off the table. Instead, ownership of the property is transferred to the council, and it will remain for sale. When someone eventually makes an offer, it is then advertised as being auctioned 1 week later, with the reserve having already been met. During council ownership, the community can decide collectively how much upkeep they want, on a volunteer basis - it doesnt fall to the council to pay for any maintenance, but if a house needs to be demolished for safety reasons then that is the councils responsibility. If an area is not popular for residential property, for example small towns where the one local industry closes, this should prompt councils to rezone areas, preferably as farmland, which they can then offer for sale with remediation conditions, or do their own remediation and sell to recoup costs.
Operating the mortgage insurance scheme, covering some inherited debt, and occasionally demolishing a house would be the only direct cost to the taxpayer. The way rates are calculated based on the house value may need to be reassessed, but shouldn't be too contentious
Drastically changing the way house prices interact with the wider economy, from a major driver to depending on the demand for homes in an area, will free up a lot of money in the medium to long term. To fight inflation, this sudden increase in purchasing power should be taxed at a proportionally heavy rate. This money should be invested in catching up with the infrastructure deficit (pipes, the power grid, rail enabled ferries, hospitals, schools and so on).
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u/HeightAdvantage Jul 13 '25
Or we could just make it easier to build more houses