The Decline into Few Zealand
That increasingly inescapable feeling when your generation is fucked™
I take pop shots at our Prime Minister on social media from time to time because I think it’s important to agitate and make fun of those in power. Nothing disturbs me quite like sycophantic supporters of someone who’s currently in a position of high leadership. Find an underdog to support, you grovelling bootlickers. Haven’t you ever seen a sports movie?
Despite my gadfly tweeting, I (and even Jacinda Ardern’s harshest critics) can’t deny her deserved political magnetism. The column inches describing her charm could reach from here to the surface of Mars, so let’s take all that as given at this point. What I want to write about is something that has also occupied an astronomical amount of ink, airwaves and online oxygen; The absurd pyramid scheme that is New Zealand’s housing market in 2021.
The median price of a house in our capital city is now over a million dollars and stat after stat describes how we are world leaders not just in our COVID response but also in housing unaffordability. This isn’t a new issue, I’ve heard our housing market described as a bubble for my entire adult life, but things have gone from bad under nine years of a National-led government who refused to utter the words ‘housing crisis’, to dramatically worse under a Labour one which emphatically reminds the populace how they’re powerless to take action.
That powerlessness is a combination of self-created and self-defined. Self-created, as in Ardern ruling out a Capital Gains or Wealth Tax for the entire term of her leadership, which based on current polling is expected to be 150 years. Self-defined as in Ardern not being able to bring herself to say aloud house prices should go down on a debate stage, even when shockingly, her centre-right counterpart conceded it needed to.
It’s a belief structure forged in the fires of what we now describe as neoliberalism. Government can’t meddle in the markets or the Reserve Bank’s business. National GDP must be protected at all costs. People who own houses vote and they cannot lose money on property - ever. Former boring TV economist/recently market-radicalised Bolshevik Bernard Hickey wrote about the prison Ardern finds herself in in horrifying clarity while we were still at the beach this month.
People my age are a part of the most diverse generation there’s ever been. Our backgrounds, personal identities, gender expressions and ideologies are myriad. By far our largest common denominator is we cannot afford to own a home. The country has been conditioned by generations of centrist politicians and newspapers to believe there’s simply no solution to this. The government proved it can’t build houses in the Kiwibuild debacle and all other levers are apparently off limits.
Between lockdowns last year, I had a real life conversation with a Green Party member who owns property in Auckland but couldn’t bring themselves to support the Poverty Action Plan. That’s the Green Party proposal to tax wealth after your first million in assets at a rate of 1% to pay for an income floor of $325/week for all New Zealanders. Their reason to reject it? They personally would be “unfairly punished”. I had to bite my tongue before the words “What the absolute fuck are you talking about?” escaped my mouth.
She explained that she’d lived in a city fringe suburb house with her husband since the late 80s and their property’s price rising wasn’t their fault, so why should they be taxed? I could have got into the broader picture - Reminding her that tax isn’t “punishment”, it’s Government intercepting a percentage of the money you make so schools, roads, hospitals and Police stations can be built and maintained - So why should money earned from her house mysteriously be immune from interception when money earned from a 9 hour shift at McDonald’s isn’t? Instead I got into the specifics of the policy.
First, I unpacked that under the PAP, she wouldn’t even pay any tax because if you’re a married couple, the first million in assets is per person - meaning she and her spouse could have a freehold house worth up to $2m and not pay a dime ($2m divided by two people means you’d only just reach the threshold of $1m in assets each, so no tax applicable).
Second, I asked her if she could remember what she paid for the property and what she thought it was worth now. She didn’t reveal the numbers to me out loud but did take a beat and her tone became more conciliatory. I proceeded to dig as to whether a tiny portion of those massive gains could perhaps go to support NZers lower down the ladder (often saddled with massive student loans) locked into a lifetime of paycheck-to-rent cheque existence for their whole lives.
“It’ll bankrupt elderly people who have valuable homes now but low income” she pivoted as a final line of defence. That’s been considered in the proposal already though. Payment deferment is a built-in feature of the proposal.
On this subject though - this theoretical elderly person has been brought up a lot in conversation about a wealth tax. Seemingly they represent the most vulnerable individual under the proposed policy. A sweet old granny who would get accidentally walloped in our noble pursuit to help society’s poorest because the Progressive Left are bad at anticipating unintended policy consequences (by the way, fucking LOL to that - see predictable success stories like Trickledown Economics, drug prohibition and the War on Terror to show those in the political mainstream sucks at crystal ball-gazing). The policy the Greens floated means that assuming this retired person is now unmarried, they could have a house worth $1.2m with a fully paid off mortgage and they’d be liable for… $2,000 a year. Which, again, could be deferred in payment to a time of their choosing, including coming out of their estate when they die. A couple would have the same $2,000 bill for a freehold house worth $2.2m. Is that really so untenable? In exchange for making sure every student, gig worker, minimum wage employee, disabled person, caregiver, parent, un-or-underemployed New Zealander had a guarantee of $325 a week coming in?
It’s hard to understand the psychological effect of economic hardship when you’re disconnected from it. The minor bouts of extreme financial insecurity I’ve experienced in my life gave me a tiny window in the constant stress and all-consuming despair poverty brings. It robs people of joy, health and self-worth. It is such a pervasive, literally mind-numbing darkness that it’s hard to understand unless you’ve lived it.
Beyond this moralising, there’s also an economic common sense to arming the poorest people in the country with enough money to survive. When you give money to society’s richest (usually in the form of tax cuts or dodges), they hide it from taxes using lawyers, accountants and complex financial arrangements - a terrible thing for the country at large who miss out on tax revenue. When you give money to the poorest people, they buy bread, milk, nappies, clothes - things that return tax revenue (through GST and other taxes) and involve a lot of economic actors in the transaction, from supermarket workers to farmers to truck drivers transporting goods.
The economic activity generated by the less off buying life’s essentials creates a stronger, broader-based economy that’s less vulnerable to shocks from unexpected forces like share market volatility. It increases employment and stimulates sustainable economic growth.
“If you give poor people free money, they will just spend it on drugs” Merv spits through his denchers at the Newstalk ZB host paid to sell boner pills to 85 year Roger Douglas fanatics. But the thing is - that familiar position is scientifically bullshit. A meta study of 44 independent studies found that cash transfer programmes (aka giving money to people without strings) showed overwhelmingly there was no increase to drug spending. Not only that, in over a quarter of the studies witnessed “a significant negative effect of cash transfers on drug and alcohol consumption”. The actual data shows us that when you give struggling people money, they stop having to use drugs to numb the incredible emotional burden of living in poverty. That means less spending on health and crime and most crucially, a reduction in raw human suffering.
New Zealand’s property class has been conditioned by generations of centrist politicians and editorial teams in our media into pathological entitlement. As a country, we’ve formed unscientific arguments and economically illogical viewpoints as to why we can’t touch our richest citizen’s wealth to help lift our most struggling kiwis to a level of economic dignity.
I reject the powerless position that Jacinda Ardern repeats.
In her office hangs a portrait of Joseph Michael Savage, the first New Zealand Labour Party leader who Ardern has frequently quoted as a political icon of hers. He led a government that nationalised coal mines and the Reserve Bank, introduced graduated land taxes, raised the top tax rate from 57% for “unearned income” (you know, like from a fucking house?) to 76.5%, introduced government subsidies on bread and butter, removed most secondary school fees and vastly expanded the welfare state.
If we don’t quickly expand our thinking to what is politically possible, economically sensible and morally indefensible - we’re going to wake up in a country with a landed gentry and rent-trapped gig workers with no way out. The longer we wait, the more impossible this situation becomes.
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The Decline into Few Zealand
I agree that messaging around tax seems to be the problem. 1% wealth tax immediately gets people saying ‘where am I going to find $10K per year on my $1M value house that i bought for $80K in 1982’. As you show, it’s not that brutal, but it takes 3 paragraphs to explain. Paper wealth tax was also a classic technique used to steal Māori land back in the day. Cash rates on tribally owned land that stacked up and forced the sale. Definitely an island or two in the Hauraki lost this way. Is it worth having a chat to some Iwi who’ve experienced this about what happened and what they think of this type of tax? Might lead to discovery of better language to describe what yr trying to pitch so it’s more digestible.
This is so frustratingly good to read - because it just seems so obvious and simple, but feels so unlikely to happen. Saying this as a non-homeowner who increasingly expects never to be able to afford one!