Taxation (KiwiSaver HomeStart and Remedial Matters) Bill

on behalf of the Minister of Revenue: I move, That the Taxation (KiwiSaver HomeStart and Remedial Matters) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. At the appropriate time, I intend to move that the bill be reported by 28 April 2015.

The purpose of this bill is twofold. First, it supports the Government’s $218 million HomeStart package of proposals to provide greater assistance to New Zealanders saving to buy their first home. Second, it continues the Government’s focus on ensuring that the tax rules apply consistently and fairly—in this instance, by ensuring that recently enacted rules relating to the entitlement scheme for veterans function smoothly from a taxation perspective. The main feature of the bill deals with one of the biggest hurdles for first-home buyers: acquiring the necessary deposit to purchase a home. For this reason, as part of the HomeStart package announced by the Government in August, this bill proposes to extend the current KiwiSaver withdrawal rules for first-home buyers from 1 April 2015.

Under the current rules, KiwiSaver members who are purchasing their first home are able to withdraw the contributions that they and their employer have made to supplement a deposit on a first home. The proposals in this bill will allow them to also withdraw their member tax credit. This will give these KiwiSaver members access to an extra $521 for each year the member has contributed to the scheme. They will not, however, be able to withdraw the Government’s $1,000 kick-start contribution. This is a pragmatic decision so that a member’s KiwiSaver account remains open and active after the withdrawal of eligible funds.

The second part of the bill introduces several small amendments to the Income Tax Act 2007 and the KiwiSaver Act 2006 to ensure that income replacement payments made to New Zealand veterans are taxed correctly. These amendments are necessary to clarify the tax rules following recent changes introduced by the Veterans’ Support Act 2014, which replaces the now outdated War Pensions Act 1954. The rules proposed in this bill make it clear that income replacement payments for veterans will be treated in the same way as ACC compensation payments for taxation, social policy, and KiwiSaver purposes. In other words, these payments to veterans will be treated as taxable income and will be taken into account for social policy calculations, such as when applying for Working for Families tax credits.

The amendments also clarify that these payments will not be subject to the KiwiSaver automatic enrolment rules or compulsory employer contributions. Proposed changes will take effect from the date of enactment and are important in order to give veterans who are receiving income replacement payments clarity on the correct tax treatment of these payments. These are the principal changes proposed in this bill.

For aspiring homeowners, the proposed changes to KiwiSaver will provide a welcome boost towards acquiring the deposit for their first home. For veterans receiving certain payments in recognition of their service to New Zealand, the proposed changes clarify the tax rules and provide a consistent approach to such payments across the tax and social policy systems. I now commend the bill to the House.

The general theme of the Labour contributions to this debate is going to be the utterly bankrupt and failed housing policy that this National Government has presided over for the last 6 years. And this bill is probably the single best and most successful part of that bankrupt and failed housing policy.

💬 Grant Robertson: Low bar.

It is a very low bar, Mr Robertson. What this bill does is allow people to break open their KiwiSaver accounts and extract the member tax credits. You know, that is arguably something a lot of people might want to do. It is arguably something that gives people—first-home buyers—more flexibility so they can use the Government contribution in their KiwiSaver accounts to get a deposit together.

💬 Hon David Parker: Spend it, not save it.

But that is the downside, as Mr Parker said—that they are spending that money instead of saving it, and are, therefore, undermining the bigger policy objectives of KiwiSaver. But what I want to focus on is just how useless the HomeStart policy is, which this bill is designed to enable.

Let us talk about the HomeStart policy. It was announced in the heat of the last general election campaign. National was desperate for something that would counter Labour’s popular KiwiBuild policy, and so it came up with the idea of throwing taxpayer subsidies at an overheated property market, where demand already exceeds supply—it reached into its store of bankrupt and failed policy ideas. This idea of subsidising first-home buyers was tried and discredited in Australia. Treasury opposed it. I understand, actually, that Bill English opposed it in Cabinet. He did not like it, but he was overruled by Nick Smith, Steven Joyce, and others in the National Cabinet who were desperate—who were desperate—to throw some money at first-home buyers in the final weeks of the election campaign.

So there are two things that the HomeStart policy does. The first is that it lifts the price cap for houses that first-home buyers can build using these subsidies—for example, in Auckland it lifts it from, I think, $485,000 to $550,000. That will significantly increase the number of people who can avail themselves of this subsidy, and, as Treasury has said: “The impact on the proportion of owner-occupiers is expected to be small, as most recipients of a HomeStart grant would have purchased a house eventually anyway. While the grant will make a material contribution to first-home buyers’ ability to raise a deposit, it makes no difference to the cost of servicing a mortgage, and with mortgage rates expected to rise higher than 7.5 percent over the next 2 years, higher finance costs are likely to reduce the number of first-home buyers able to purchase their first home.”

It is a self-defeating policy. It will actually increase the total costs of homeownership for first-home buyers. It stokes demand in a market where demand already exceeds supply. That is why Treasury advised against it. That is why all of the critics panned the policy when it was announced, and that is why the policy has been discredited in Australia.

The second key aspect of this policy is that it doubles the subsidy available per first-home buyer from $5,000 to $10,000 if they take on a new build. The idea is that somehow an extra $5,000 per first-home buyer, or double that for a couple—an extra $10,000—will be enough to convince an aspiring first-home buyer to take on the massive cost, time, and logistical burden of doing a new build. And the question we have to ask ourselves is: will it actually make a difference?

Nick Smith is going to stand up and say that this legislation will stimulate supply because he is so desperate, having gazetted 80 special housing areas and having issued I do not know how many press releases projecting thousands of consented subdivisions, sections, and houses out into the long-run future. I think only 18 houses will have actually been built by Christmas in the special housing areas. He is so desperate to get the private sector to try to actually build some houses that he is hoping this measly little subsidy is somehow actually going to get the Auckland land bankers to stop sitting back on their porches, watching the land values of their land in the special housing areas go through the roof, and start actually building houses.

Well, Nick Smith is on a fool’s errand, because he must know that all of those developments are planned 2 or 3 years in advance. So all of the developments that are currently on the drawing board in Auckland in his special housing areas—they are all houses. They are 200-square-metre houses on 600-square-metre sections. They are going to sell for $800,000 or $900,000. No one is building the kinds of houses that first-home buyers can afford or that will come within the $550,000 price cap in Auckland. So this is doomed to failure, at least for the next few years. It will not solve the acute political embarrassment that Nick Smith faces wherever he goes in New Zealand, where he gets constantly asked how many houses have been built in the special housing areas. And this is the problem that National members have got: their only response to the Auckland housing crisis is the housing accords, where they have drawn a whole lot of lines on a map, called them special housing areas, and fast tracked the consenting with Auckland Council, somehow hoping that that broken market will fix itself.

Well, it has not, and no amount of press releases, photo opportunities, and extra special housing areas is going to intimidate the Auckland land bankers into actually getting off their chuffs and building houses, and this will not do it either. But the policy overall will stoke demand generally, and that is what Treasury has said. That is what all the commentators have said—that it will actually make matters worse.

So what have we got, in terms of the National Government’s response to the Auckland housing crisis? What have we got? We have got the special housing areas that have delivered, I think, up to this day, five completed houses in 12 months. What we know from the Government’s own figures, from the National Construction Pipeline report that Nick Smith put out a few weeks ago, and from the briefing to the incoming Minister, is that even if Nick Smith’s heroic projections of the number of houses that would be built over the next 5 years are met—and it looks like they will not be—there will still be a deficit, according to his figures, of 18,000 houses.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Can I just ask the member to sit for a second. He has 2 minutes to go, but I would like to ask him, in the 2 minutes that he has left, to focus on the bill before the House rather than a general Auckland housing debate.

You are right, Mr Assistant Speaker. I should not have called Nick Smith’s projections heroic, and I withdraw that comment, and I will focus more tightly—

The ASSISTANT SPEAKER (Hon Trevor Mallard): What the member will do is he will get on with debating the bill, and not discuss the rulings that I have made.

Thank you, Mr Assistant Speaker, for that advice. What we know is that this bill enables first-home buyers to break open their KiwiSaver accounts and access the Government contribution—the member tax credits—in order to put together a deposit. That is the key thing about this bill. There are also some changes to veterans’ income replacement payments that we can go into in more detail later on.

But the crucial thing is that this bill is part of a policy that is designed to help first-home buyers deal with the extreme hardship and disadvantage that has been imposed on them by this Government’s utter failure to get a grip on the Auckland housing crisis. It is the disadvantage that has been imposed on them by this Government’s backing the Reserve Bank into corner and forcing it to impose loan-to-value ratio lending restrictions that have driven 25 percent of first-home buyers out of market. They have disappeared. They have gone because they cannot possibly hope to compete in a market like Auckland’s, where house prices in the last 12 months have gone up by more than $62,000. They cannot compete in a market that is as overheated as that, with speculators, both foreign and domestic, basically cleaning up under National’s policy settings.

All of the papers that have been released by the Ministry of Business, Innovation and Employment and Treasury have condemned this policy, and I think we will hear a lot more about that as the debate goes on.

I have never been so delighted to get to my feet and support a bill that is going to help tens of thousands of young Kiwi families to pull together a deposit for their homes. I am absolutely delighted that the Labour members have stated that they are going to oppose this help for people wanting to own their own homes.

I firstly want to deal with the record, because the first point that the Labour spokesperson on housing said was: “Where’s the progress in the Government building more houses?”. Let me give the member the numbers. When we came into Government, New Zealand was building just 1,000 houses a month—a thousand houses a month; the lowest level for 10 years—in November 2008. Do you know what we know from last month’s figures? We are now building 2,000 houses a month—exactly double the number from when we came into Government. How can any member opposite say that that is anything other than a positive supply response from our Government?

Then we come to the issue of house price inflation. Let me give the members opposite the numbers. During their 9 years in Government, house price increases averaged 16 percent per year. House prices grew by 29 percent in a single year, and the Labour Party said: “Oh, that’s a crisis.” I would like it to explain this: why is it not a crisis when under a Labour Government house prices go up by 28 percent in 1 year, but when this year the average increase over the last 12 months was 8 percent it is a crisis? I do not understand; I think it is just straight politics.

The third point is this. There are three independent measures of housing affordability—three independent measures. There is the Massey University one, there is the Demographia index, and there is also the index put out by Roost. Every one of them shows that housing affordability today is 30 percent better than it was when Labour was in Government—30 percent better. So what is this about a housing affordability crisis from Mr Twyford? I will tell you why. One of the most important factors that affects housing affordability is interest rates, and because of the dopey economic policies of the previous Government, New Zealanders were paying 11 percent interest when we came to Government—

💬 Tim Macindoe: 11?

—11 percent—and today they are paying 6 percent, and New Zealand interest rates will be lower for longer because of the responsible economic policies of this Government.

I also want to highlight a couple of features where Mr Twyford was wrong. He said that the Australian policy has failed and that we are doing the same. No, we are not. I will tell you, very importantly, why. This policy is targeted at doubling the support for new homes. What the Reserve Bank said, what Treasury said, and what the Ministry of Business, Innovation and Employment said was that the Government should put its support into building new homes. The second thing they said was that we need to get the market to work better and to build more homes that are affordable. That is why the HomeStart grants are specifically targeted at getting the building industry to produce more product that is affordable.

💬 Phil Twyford: Why did Bill English oppose it at Cabinet?

Bill English never opposed it. He has been very supportive of this. I could go through Mr Twyford’s speech and go through eight untruths that he said, each of which I noted down as he went through his speech—

💬 Hon Member: Only eight?

—eight points where he just simply said things that are documented and known to be untrue.

The further point I would make to the member is that this policy is going to allow 90,000 Kiwi families on modest or lower incomes—that is, under $120,000 if you are couple, or under $80,000 if you are a single person—to be able to access their KiwiSaver funds and receive a Homestart grant to get into their homes. What is it that Labour Party members hate about helping New Zealanders on modest incomes to pull together a deposit for a home? Why is it that they are opposed to it?

I have another question for those members: when Labour brought in the KiwiSaver policy and when it brought in the grants that it did during its period in Government, why is it that it was a good policy when Labour did it but a bad policy when National does it? Why did Mr Twyford give a speech about grants for first-home buyers being a bad thing, when they did it themselves when those members were in Government? It is just that we are being more generous. That, to me, is a totally double standard, and shows a lack of integrity in terms of their policy position.

It is just the same old story from Mr Twyford. He is concerned about and keen to cry crocodile tears at every opportunity over the issue of homeownership, yet every time the Government comes into this Parliament to do constructive things to address it, he is opposed. So when we come and bring in the housing accords and special housing areas legislation, he is opposed. When we come in to reduce the duties and tariffs on building products, he is opposed. When we come—

💬 Phil Twyford: We voted for that.

No, you voted against the Budget. You voted against the Budget, and that was the measure that actually enabled that provision to come into effect. Then, the third time when we come to this Parliament to help Kiwi families to pull together a deposit to get into a home, Labour members are opposed again. I just simply say that Mr Twyford is the “member for problems around housing affordability”, but we are the party for solutions, and the House should support the bill.

I think he is the “member for problems”, I will certainly give him that—Nick Smith, the Minister who has just sat down.

In a Government that is increasingly in disarray, we have reached peak chaos when it comes to housing, because that is what has happened on that side of the House. No matter how much Nick Smith can get up and bluster away about what he thinks he has done, every other commentator in New Zealand recognises that this Government’s housing policy is a failure. Every other commentator recognises that, except for Nick Smith. It is all very well to come to the House with this bill, which is a meek and pathetic and pitiful attempt to do something about housing, but to actually address housing, the Government needs to think about actually addressing both sides of the housing equation.

There are some members on the other side of the House who perhaps have been a little surprised at my becoming the finance spokesperson, but here is a message for those members. It is a pretty basic one: if a market is going to work, you have supply and demand. And, unfortunately, when it comes to the National Government, it thinks it can put up demand measures and not address supply. As Phil Twyford said at the start of this—

💬 Hon Dr Nick Smith: We’re building record numbers of houses.

Nick Smith says National is building record numbers of houses. Dr Smith, you are not. You are not building record numbers of houses; you are building half the number of houses that Labour was building at the peak of its time in office. The fact is that if Dr Smith wants to compare the building of houses during the global financial crisis with the building of houses today, well, he can come up with his mythical statistic of doubling the number of builds, but in reality there has been a complete failure by the Government to build houses. Dr Smith himself has admitted it. We have got an 18,000-home gap that has been built up in terms of what is needed in Auckland. You need to be building 13,000 homes a year just to stand still, and we have an 18,000-home gap built up. There is a crisis, Dr Smith, and it does not matter how often you want to walk away from it.

Housing is now completely unaffordable for a large number of New Zealanders, and the kind of tinkering measure that is present in this bill does very, very little to address those issues. You know, New Zealanders for many generations have thought that owning a house was the kind of thing that was part of life, that when you got a good job and you were well-paid, you would be able to own a home. Well, unfortunately, at the moment it costs 63.1 percent of one median income to pay the mortgage on a median-priced house. That is up from 55 percent just 5 years ago. If you are in Auckland, it costs 88 percent—

💬 Hon David Parker: 88?

—88 percent—of one median income to pay the mortgage on a median-priced house, up from 70.4 percent 5 years ago. It is up 18 percent in just those 5 years. So coming up with a scheme that might give somebody an extra couple of thousand dollars or that gives a couple maybe an extra $5,000—

💬 Hon Dr Nick Smith: $10,000.

—does not bridge the gap, Dr Smith. It does not do it. This is a pitiful response.

When you take the average price of a house in Auckland, it is $748,955. That is up by 3.1 percent in just the last 3 months. As Andrew Little said the other day, the average house price in Auckland earned more in the last year than the average worker did. It is out of control, and all the Government can do is come along and tinker and add on to the KiwiSaver policy in a way that is, in fact, greatly exaggerated.

I do want to pick up something that Nick Smith has just said. He has claimed that the additional number of people benefiting from this proposal is 90,000 people. An impressive-sounding number, Dr Smith, except for the fact that 50,000 of them were going to get that benefit anyway. No change—50,000—

💬 Hon Dr Nick Smith: No, only when that changed last year.

No, that is what Treasury has said: 50,000 of those people were already going to get it. So, actually, the number that is claimed is around 41,000, except the chaos of this policy continues because when National tries to work out its costings, it says that it is going to cost $218 million, but that is for the 41,000. So if it is 90,000, Dr Smith, then the cost would actually be $435 million. So the Government cannot even get its numbers straight on this policy, let alone know whether or not it will actually have any great impact.

It is quite clear, as Phil Twyford has already said, that if demand is going to increase in a supply-constrained environment, this policy is not going to work.

💬 Hon Dr Nick Smith: Grow supply.

Oh, “Grow supply.”, Dr Smith says. That is exactly the point. How many houses has the Government built? The great housing accord has built five houses.

💬 Hon Dr Nick Smith: 24,000.

He is now claiming it is 24,000—plucking a number completely out of the air. It is interesting that the UK Conservative Government has actually come out in just the last few days and said—and this is the exact quote from Danny Alexander—to the private sector: “If you don’t build houses, we will.” That is what the UK Government is now saying, because, as a Conservative-led Government, it recognises that actually—

💬 Hon David Parker: A Labour policy from New Zealand.

Yes. It has had a look at KiwiBuild. It will be called “Corgi-Build”, or something of that nature that goes on in the UK. It has recognised the need to make sure that the State is actually there when the market is failing. That is Dr Smith’s problem. He is not prepared to use the fact that the Government can build these houses.

KiwiBuild was a popular policy, and some of the backbench members over there were shouting out about 25 percent. The reality is that you can look at any survey of that policy. New Zealanders understand that if we are going to ensure that people have the ability to buy an affordable home, there needs to be direct intervention from the Government to do so, but this Government is not prepared to do that. It only wants to sit back and try to let a market that has already failed fail even more, and that is the situation we find ourselves in today when we look at this bill that is in front of us here.

We have a situation in New Zealand where homeownership rates are the worst that they have been in 60 years. We have a situation where housing costs are outstripping and growing faster by far than income, and it is getting worse under the watch of this Government. Everything that this Government touches with housing is too little and too late, and that is what we see in this bill.

Nick Smith raised the question of why something is wrong when Labour brought it in as a subsidy scheme, and he asked why it is now wrong to extend it. The problem is the situation of supply. If Dr Smith cannot come forward to this House with realistic initiatives that will create more than just a handful of houses around Auckland—

💬 Hon Dr Nick Smith: 24,000.

He keeps claiming it is 24,000. That is not what the Government created. That was happening anyway. The big new initiative has resulted in five houses, with the massive number of 18 predicted by the end of the year. There is going to be a spurt in the last couple of months, and he will get himself to 18 houses. It is pathetic.

So in terms of this particular bill, the Labour Party looks at it like this: if the Government really wanted to ensure that it was supporting first-home buyers, it would focus on the building of affordable homes. By saying in this particular proposal that they want to focus on new builds, there somehow is a belief in the Government that new builds will be in the affordable housing area. Well, the evidence out there is that that simply is not true and is not credible because, for developers, the money is not made in the affordable housing sector. We know that—that is the history of what has happened over the last few years. That is why we do not have affordable homes. So simply saying in a blanket way that because there are new builds, it will somehow translate to affordable homes, is not accurate. If the Government wants affordable homes built, take the lesson from what is happening in the UK and get in there and muck in and help out in the sector instead of standing back and trying to use instruments that are actually not going to work. This may well benefit one or two people. Well, that is good, to a small extent.

💬 Hon Dr Nick Smith: 90,000.

It is not 90,000, Dr Smith—we have established that. If it is 41,000, you will be lucky. The problem is that whichever number it is, it is a drop in the bucket. What is needed is housing policy that addresses supply and demand, and supply in terms of affordable housing. That will happen only if the Government plays a more active role. If it carries on the way it is going, the crisis will deepen, and more and more young New Zealanders will miss out on the opportunity of buying their own home.

It is great to be able to support this bill. First of all, it is a little bit hard to look at a gift horse in the mouth and not take it up. Grant Robertson said he was a little surprised at becoming the finance spokesperson for Labour, and that last speech of his tells you why. There was no economics in it, there was no understanding of what supply and demand means, and there was nothing in it that would show that there is an intellectual or smart economic mind on that side of the House. Housing is dear to the Labour Party because “Chippy” is still yet to buy his first house, and Labour will be looking at a way for him to do that. In the end, Grant Robertson had to resort to using his leader, Andrew Little, as his economic guru.

KiwiBuild is a dog of a policy; it would never work. It was something where they were going to build houses for the price of the land. That was how good KiwiBuild was, and New Zealanders understood that and knew it would not work. This policy does work. This policy gives New Zealanders who are working and saving the ability to get that deposit to get into their first home. It effectively doubles the amount of money that they can withdraw to get into that home and get that HomeStart package. It enables New Zealanders who are working hard and who have contributed to the scheme to actually have that deposit to get into the property market, and that is a great thing.

People have seen the numbers, and they have worked it out, and they have seen that they can get a home now, whereas they could not have got a home in the past, and they like that idea. We have changed the thresholds for the price of properties in different cities, we have enabled buyers to withdraw their KiwiSaver funds, and we have, effectively, doubled the amount that that contribution will be for a deposit. This is good for New Zealanders getting into their first property.

The other thing that we have done is make sure that we have an economy that is strong, where interest rates are at 6 percent, not the 10.9 percent that the Labour Government left us with. We have an economy where people are getting jobs and where there is economic growth, unlike what the Labour Government did when they left the country in recession. We have a country where we are not seeing the house price inflation that we saw under the Labour Government. Under the Labour Government there was a 96 percent increase in house prices over 9 years. It has been 28 percent in 5 years under the National Government, and that shows that New Zealanders have the ability to get into houses. This bill helps them do that, and it is great for New Zealanders. Thank you.

I am a little surprised to be speaking on this bill this afternoon, having already given my season’s greetings to the House and to the Speaker’s team. Can I maybe begin by reiterating my earlier good cheer. I guess it reflects the fact that this is a bill that is moving rapidly through its process. That is a surprise in some ways because National did announce its HomeStart policy prior to the election, so one would have thought that such a rushed process would not be necessary.

Unfortunately, that kind of poor process has become a bit of a hallmark of some of the Government’s legislation. I notice in particular the lack of consultation that has occurred to date on what is referred to euphemistically in the bill’s title as remedial matters, which effectively, of course, amount to a cut to veterans pensions. At this point, the external consultation on that part of the bill is non-existent. As a result, we are very cautious about our approach to this bill. We are prepared to support it to the select committee, and we are very interested to hear what submitters—I am thinking particularly of the RSA, for example—are going to have to say about the bill, and some of the social housing providers, tenants organisations, and so forth, as well as other stakeholders in the housing sector.

I am going to primarily in this contribution talk about some of the housing aspects. We think that although the net effect is extremely small, the $1,000 contribution will be a helpful contribution to at least some people. I was very interested to hear Grant Robertson’s analysis of Dr Smith’s statistics in relation to the number of people who are expected to be assisted. I tend to think Mr Robertson is probably closer to the mark.

To begin with, the critical thing to say is that the measure in relation to KiwiSaver in this bill essentially facilitates part of the Government’s HomeStart package. Like a number of other measures that the National Party announced in the weeks immediately prior to the general election, this was a package that appeared to have been developed without a lot of consultation, not only with external stakeholders but also with Government agencies. Indeed, the response of commentators in the housing sector to the HomeStart package was, at best, underwhelming. It has all the appearance of policy that was made up pretty much on the hoof. It was a package that was essentially a political measure aimed at solving a political problem rather than dealing in any real way with the housing crisis. So we actually believe that on balance the HomeStart package will make the crisis worse rather than making it better.

It was designed to—and arguably did—give National some cover-up in the run-up to the election, but actually it does not deal with the fundamental issues of affordability and housing supply. The consensus of commentators, I think it is fair to say, was that HomeStart will actually fuel demand, pushing up prices across the board and driving housing inflation in an already overheated market. So that is kind of the reverse of what we actually need to be occurring in the housing sector. As other speakers have mentioned, it is a demand-side response to what is very largely a supply-side problem, so actually fuelling demand is never going to deal with insufficient supply. I guess Dr Smith argues that down the line it is going to stimulate the private sector to build more houses. I think that is a very long bow indeed to draw.

The advice from Treasury itself—and we have heard a little bit from Labour speakers already about some of Treasury’s analysis—in its own words was that “experience with home ownership grants in Australia”—a very similar kind of policy—“suggests that such programmes tend to push prices up in a supply constrained environment by supporting greater demand, rather than improving affordability.” So we should not be holding out any hope that this policy is going to result in any kind of solution to the problem, although the specific measure in this bill might be of some assistance to a small number of Kiwis. But I stress that it will be a small amount of assistance.

In the years since National came to Government in 2008, the average house price in Auckland has increased by $200,000—increased by $200,000. So a nudge in the direction of some assistance of $1,000 might be conceivably just that little bit extra, that marginal improvement that a very small number might need to make the necessary difference, but for the vast bulk of people it will actually go nowhere towards meeting that affordability gulf.

So what we propose instead is that policy should instead focus on the real drivers of the problems that we are facing, so it should focus on the untaxed income from capital gains that is fuelling speculation and fuelling land prices and, indeed, the cost of housing, particularly in Auckland. How about dealing with the essentially unfettered offshore speculation in the residential property market—again, particularly in Auckland? Again, that is one of the fundamental drivers that is essentially untouched, although we did hear today that, actually, after thinking about it for a bit, the Government might finally be interested in looking at some solutions in that area too.

The other critical area that is really untouched by Government policy is the fact that land values and the cost of building are driving up house prices, both to buy and to rent, and that prices fall well outside the budgets of an increasing number of people. What that suggests is that the problem of growing income inequality that we have in New Zealand sits, actually, at the heart of some of our issues, along with those other drivers that I have mentioned. If we are seriously interested in dealing with the housing crisis that we face, well, those are the issues that we have got to address.

So we have some solutions that would make some genuine progress. We advance our solution—and stick by it—of a capital gains tax, excluding the family home. We will increase the supply of affordable houses by undertaking a programme of State house building, along with assisting local government and other social housing providers to increase supply. We suggest that National would be smarter, in fact, to be building hundreds of houses rather than selling them off. We also support rent-to-own schemes, both in the State part of the housing sector and also facilitated in other parts of the housing sector. We need stakeholders to get together to develop solutions, rather than have this sort of sticking plaster approach that we see from National time and again. So we support this bill going to a select committee, but we make no commitment after that.

I have to start off by agreeing with some of the members on this side of the House. It just seems like National is introducing remedial matters—just little things that do not go far enough. Actually, it is a little bit too late now. Why do we have concern with what it is proposing at the moment? Well, the reality is that freeing up that little bit of extra cash actually, as stated before, feeds into the supply concerns that New Zealand First has, particularly with the housing bubble in the Auckland market. So you are adding to the ability for first-home buyers to buy into a market. You are fuelling supply and you are stoking the fire even further.

💬 Andrew Bayly: That’s right—adding to supply.

Thank you for the correction. I am nervous. You are fuelling the demand from your first-home buyers, and it is adding to the problem, in fact. It is counter-productive, and at the moment it seems to serve no purpose.

The levels set out for the purchase of new homes in Auckland are, as acknowledged before, just too low. They do not actually help anyone get into the Auckland market in the first place. You are talking about purchasing homes around the half-million-dollar mark, when we have got quotes for new homes in the $600,000 to $800,000 range. We know, actually, that builders and the property market developers are more interested in building those premium homes, where they get a much better return. So who are we actually helping?

The house price inflation, which was talked about earlier, is, in reality, still much higher than the rise in people’s incomes or household incomes. It was argued that price inflation for our houses is not as high as it has been before. It might be acknowledged, except I think the Minister conveniently mis-aggregated the data and forgot to mention the specifics around Auckland, but really and truly, the issue is around growing incomes. They are not growing as compared with the rising prices of our homes in New Zealand.

I suggest that, actually, the affordability in the regions might have helped bring that aggregate value down, because this Government does not seem to be doing anything to help our regions grow. The prices of properties in Rotorua, for example, have not changed for the longest time. They have been static. Where is the support for growth? What are we doing beyond giving new homebuyers $1,000 extra and allowing them to purchase a slightly more expensive home? It does not seem to address the real issue.

This bill is testament to that disregard. Instead of compromising people’s savings and eating into their retirement funds—because I was trying to do the numbers earlier today. I thought I had some time. I can speak only in averages, but even taking that $1,000 extra out of the savings equation at that stage in their retirement plan compromises the total value of their savings when they become entitled to it. We are talking of a difference of tens of thousands of dollars in terms of the sum of retirement that they would have had but now will not because it has gone into their houses.

The other side might say that owning a house is a great way to save, but, as I said before in the House, actually the Auckland market is a bubble. It is growing exponentially, almost. There is talk of the immigration numbers just fuelling it further and further. Beyond immigration, there is speculative foreign investment in the local market. It is just fuelling the fire and at some time the bubble has to pop.

So where does that leave the people whose retirement money could have been growing exponentially over time, adding to actually what should be liquid—money that they can actually use when they retire, as opposed to bricks and mortar, where the money is tied up? Although, as I was writing my notes coming down to the House, I noted that actually what we could do is continue to grow the property bubble in Auckland and then, when they need to free up some money for their retirement, they could sell their houses in Auckland and come and move to Murupara. That way, if they keep doing that and Aucklanders keep moving out of Auckland, we might alleviate the pressure somewhat, and the community of Murupara might grow with some wonderful senior citizens who could enjoy the local forests, lakes, and other wonderful sites.

We talked about supply and demand. The issue is around immigration management. We have this huge bubble. It is not being acknowledged. It is not being managed. We talk about measuring something. I do not know what they hope or intend to achieve with that. The reality is that we are an open market. People are coming in, they can see the returns, and it is undermining the very people whom the Government is presuming to help by allowing and making these changes with this bill.

It is a conundrum. I do not think this bill serves any purpose whatsoever. New Zealand First, in relation to this bill, acknowledges that the Government is trying to do something. What it hopes to achieve out of this we are not quite sure, so we have to therefore say, yes, OK, let us support it through so that it can go to the select committee so that we can hear from the experts, hear what they have to say on this legislation, and see whether it will actually make a difference. We do not think it will. We think it will fuel fires. We think it will actually be counter-productive.

Just to finish off, I would make a note to those who write the explanatory note and the legislation—I am trying to understand and I have tried to get as much advice as I can on the part where we are seen to be fixing remedial matters, especially with regard to our veterans. New Zealand First is concerned that they are not remedial matters. In fact, our interpretation of the amendment is that this will actually compromise the potential incomes of our veterans. I hope to be proven wrong. As I said, I have taken advice as best as I can and as quickly as I can on the matter, but at the moment our interpretation is that the bill actually contravenes our Veterans’ Affairs Act, where we talk about that benevolent margin. We wonder, in New Zealand First, whether in fact this tax fix-up compromises our veterans’ entitlements. We would absolutely—and we must—ask that this be discussed and fleshed out in full at the select committee, because the last thing that New Zealand First wants to see is that our veterans are losing out, that, in fact, it is not just a tidy-up, and that our veterans are being compromised in terms of their entitlements and being able to enjoy retirement and their livelihoods, which they absolutely deserve.

We commend the bill through this first stage. We would like to hear what is said further. Thank you.

It is a pleasure to take a short call on this very important piece of legislation, which is a part of the Government’s multifaceted and comprehensive programme for dealing with the housing problem in New Zealand.

It was interesting to hear my colleague Mr Hague from the Greens talking about capital gains taxes. The real question for this House is, I think: what is the policy of the Labour Party these days when it comes to capital gains taxes? It took a policy to the last election, and it was widely ridiculed. In fact, the leader of the Labour Party at the time—the third in the last 3 years—was ridiculed after his television appearance about the policy. Is the Labour Party still in favour of it? The reality is, actually, that the capital gains tax, as proposed by the Labour Party and the Green Party—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! [Interruption] Order! This bill is not about a capital gains tax.

I commend the bill to the House because of the very important measure it will take to improve housing affordability for young New Zealanders.

It is with pleasure that I rise to speak on behalf of the Green Party in this short call I will be taking on the Taxation (KiwiSaver HomeStart and Remedial Matters) Bill.

The bill has come to us kind of out of the blue, and there has not been a huge amount of opportunity to absorb the detail of it. The bill covers two key things. One concerns KiwiSaver entitlement, which is supposedly what the Government is doing to help young families buy their first home, as we have just heard from the previous speaker, Chris Bishop. But the bill is also dealing with a change for veterans. From what I can make out of what is in the bill, it is putting their payments on a parity with ACC.

I am slightly bewildered as to why we have this in a piece of legislation coming to the House at this time, when the previous Parliament dealt very comprehensively with a very large piece of legislation called the Veterans’ Affairs Act. It was the result of years of work by the Law Commission, and Parliament spent many, many hours on that piece of legislation. I am at a loss to understand why the Government is now bringing us another piece of legislation, and is calling it a remedial matter, to change an aspect of what was in that legislation. It is very confusing. If there is a reason that is not the Government’s incompetence, then I will look forward to hearing about that within the select committee process.

The Greens are supporting this legislation’s referral to the select committee, partly to examine that issue. We spent many hours in this House traversing those issues, and they are important. It feels very present at the moment, when the Government has made the decision to send people for training to serve in a conflict environment where we know lives are at risk. People’s lives are lost and damaged by the decisions of this House, and it is critical that we give respect to those people for the decisions that are made and that they have to live with.

I would like to spend a little bit more time just talking about some of the discussions on housing that have come up in the debate so far. We heard from Nick Smith how the situation of housing affordability is so improved under this Government. It is extraordinary, is it not? The conversations we hear in the media and the statistics I read, which came out in the household economic survey just last week, show that although household incomes have increased by 9.1 percent since 2012, the cost of living has increased by 11.1 percent. That has largely been driven by the disproportionate increase in the cost of housing, yet that is not part of this Government’s reality. Apparently, all those people who are struggling to pay their mortgage, who are struggling to pay the rent, and who are struggling to even get into a house in Auckland—they are just deluded. There is really nothing to see here. Everything is fine, according to this Government.

Again, this is one of those moments when I am wondering what reality the Government is living in. Who is it talking to who is finding housing affordability improved? It is no one I am talking to, I must say. Maybe I am not talking to enough bankers. Maybe I need to get out of my bubble and go and talk to more bankers, and have a more balanced perspective, because the people I am talking to are struggling, and they are finding it difficult. When we have an affordability crisis—and I will use that word, based on the experiences I am hearing—when we have a supply crisis, when we have a quality crisis, and when we have a security of tenure crisis, is this piece of legislation going to help? The answer is no. It is not going to help the level of crisis. It may help some people. That $1,000 may help some people when their income is at a certain level. That may just push them over. On that basis we are not going to be curmudgeonly and say that we will not support that in principle, because even a pinch of salt is sometimes helpful to the cooking, but really we need a whole lot more flavour and a whole lot more work going on in this area when it is in crisis.

Tēnā koe, Mr Assistant Speaker. Tēnā tātou katoa. I just want to acknowledge the last speaker from the Treasury benches, Mr Bishop, for his multifaceted contribution in defending the bill. The only problem was that I was listening with interest for the “multi” part and the “faceted” part, but, alas, that was not to be.

Labour supports any initiatives that assist first-home buyers into affordable homes, but there is a roaring fire across the country—the fire is called a serious housing crisis—and I liken this bill to a water pistol attempting to put out that roaring housing-crisis fire. I have been listening to the National members and they are defending a bill that is going to address housing affordability in New Zealand, but I struggle to hear the rationale as to how this bill is going to address that.

But let us turn to the purpose of this bill. The bill implements part of the Government’s HomeStart package to enable people to withdraw Government contributions to their KiwiSaver accounts in order to buy a home. The other part of this bill makes amendments to ensure that income replacement payments under the Veterans’ Support Act 2014 are treated in the same way as ACC payments, making them subject to tax, and allowing the partner of a deceased veteran to claim their Working for Families tax credit.

I listened to the contributions, particularly from our side of the House, and I say, from my experience going up and down my electorate of Ikaroa-Rāwhiti, the housing crisis goes beyond what this bill is attempting to do. It is like what previous speakers on this side have said: the supply issue is real. The supply issue is real, and yet what we have in front of us does not even address the supply issue, unlike Labour’s policy of KiwiBuild. That is a complete policy initiative aimed at building 10,000 homes to address the supply issue we have in this country. But, no, here we have in front of us today the Taxation (KiwiSaver HomeStart and Remedial Matters) Bill. There is a housing shortage, and there have been contributions around the reality of that, but I, as the member for Ikaroa-Rāwhiti, can guarantee that we have housing shortages right throughout my electorate.

When I go through this bill and I ask myself the questions that this bill is attempting to address, one of the questions that comes to mind is whether the bill will improve homeownership. That is the question I ask. Will it improve homeownership? The answer is no. How do I come to that conclusion? The Cabinet paper. What did the Cabinet paper say on HomeStart? It noted the impact on homeownership will be small and cancelled out by rising interest rates. This is in the Cabinet paper: “The impact on the proportion of owner-occupiers is expected to be small as most recipients of a HomeStart grant would have purchased a house eventually anyway. While the grant will make a material contribution to first-home buyers’ ability to raise a deposit, the grant makes no difference to the cost of servicing a mortgage. With mortgage rates expected to rise to 7.5 percent over the next 2 years”—

💬 Chris Bishop: Not to 11 percent like under you guys.

—no, you had your turn—“higher financial costs are likely to reduce the number of first-home buyers able to purchase their first home.”

Generally, when we bring legislation into this House, we take advice from officials. Treasury officials themselves have said in their advice to Cabinet: “Treasury does not support the expansion of first-home buyer assistance subsidies at this time, given that they stimulate demand for housing when demand is already outstripping supply.” Like I said in my opening contribution, this is a water pistol trying to put out a roaring fire called the housing crisis. Kia ora tātou.

I am very happy to be supporting this bill. As we are aware, the bill has two key components, the first of which is to look after our veterans who have been in harm’s way. But, secondly, and probably more importantly in terms of the housing conversation, it is about opening up the access to KiwiSaver. Both are worthy causes, but this is all about the Government delivering on its promise. We want to see more homeownership by first-time buyers, and this is what this package is about. I am very happy to support it.

I am pleased to rise to take a call on the first reading of this bill because I am angry. I am angry at this Government for continually sitting on its hands around the issue of affordability for people who want to buy homes. I am angry that this Government refuses, time and time and time again, to do something appropriate around affordability, accessibility, and homeownership, particularly for our young people.

I have a 23-year-old daughter. Will she ever be able to own a home? She saves, she is part of KiwiSaver, she works hard. I want to know that my daughter and my grandchildren will actually be able to own their own homes, because—do you know what? Do you know what? Homeownership leads to a whole lot of benefits later in life. If you have an asset in a home, then you have set yourself up for life. We all know that. So why is this Government wanting to restrict our young people from homeownership? [Interruption] You tell me. Mr Bishop, you can get up and answer that question. That would be really great.

Will this small, multifaceted measure do anything to improve homeownership? Well, my dear colleague over here has said no. And do you know what? The Cabinet paper said no as well.

💬 Meka Whaitiri: Everyone says no.

Everyone says no, except for the National Government.

💬 Meka Whaitiri: Election sweetener.

That is right. Will this small, multifaceted bill do anything about affordability?

💬 Meka Whaitiri: No.

No. Let us have a look at the facts, shall we? Here is what the experts tell us: these schemes are intended to assist people to buy moderate homes that they can afford. Although the price caps should adjust for inflation, increasing them excessively encourages people to buy homes they cannot afford the mortgage on, and it pushes up house prices, making first-home buyers worse off. Oh, my goodness—it makes first-home buyers worse off.

Do you know what I heard the other day? I think it was actually said in the House. I heard that the average house in Auckland earned more than the average wage. If you have a home in Auckland, the equity built up on it is more than the average wage of a worker. I think that is extraordinary, do you not? So you can own a home and have that passive income, but if you go out to work every single day—

💬 Meka Whaitiri: At no tax.

—at no tax—as a hard worker, a decent worker, in this country, and you get taxed like billy-o—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! You are bringing me into the debate.

Thank you, Mr Assistant Speaker, I will—

💬 Chris Hipkins: But you do work.

But you do.

So how can we achieve affordability? That is the question, and we have the answer, of course, with KiwiBuild. Affordability is around supply. If you increase supply, you increase affordability. And you can build decent homes. The Government has the ability to use its capital, its extensive contacts across the country, its connections with building supply companies and construction companies, and its ability to legislate around development costs and around land accessibility—

💬 Chris Bishop: We’re doing that.

Well, we would like to. We think you should do it, because it is a great bill. It is a great bill. I am sorry, Mr Assistant Speaker; I am really passionate about this. I believe in home affordability for all people.

What are the changes that this Government has made? Let us look at them. Loan-to-value ratios—have loan-to-value ratios made a difference to affordability? Has it made a difference to the ability for young people to get into a home? I see that side of the House has gone quiet now when we bring up loan-to-value ratios. What has been the impact of loan-to-value ratios on first-home buyers? I would like to hear that from you. Do you know what has happened? The loan-to-value ratios have restricted the market so much that they have provided a haven for overseas investors, and they have provided a haven for people who want to land bank—people who buy tracts of land and wait for the price of land to go up because they know that the developers are standing by the gates waiting for that land to be freed up. These Government members have the cheek to say that it is local government’s fault for not releasing land. They have the nerve to say that, when it is really the developers holding on to the land, knowing that the price is going up—that is the issue here.

With regard to the overseas investors, we hear today that the Australian Government is looking at registering overseas investors who want to purchase property in Australia. What is the Government doing about that?

💬 Meka Whaitiri: Soft touch—we’re a soft touch.

Absolutely. We have pooh-poohed that idea for long enough. Why does this Government not want to look at registering overseas investors? Why not? What would that do? It would give us information with which to base policy on, certainly. We would know exactly how many overseas investors were looking to purchase homes in this country. Why can we not preserve homeownership for New Zealand residents and people who actually want to live here—New Zealand citizens? Why is that such a bad deal?

I am concerned for people like my daughter who, eventually, will want to buy a home and who will be priced out of the market. Most of you know that I come from Christchurch. We have a real issue with affordability in Christchurch. We also have an issue with the land that is available to be used for the building of homes. When Government members responded to the housing issue, or the housing challenge as it is known by this Government, they said at the time that they supported the opening up of land developments on the edge of the city, and that homes in the region of $500,000 were going to be what affordability is for the people of Christchurch.

Factor into that the fact that most people have to travel significant distances now to get to their places of work, and you have cut any gains out. You have increased the ability to—sorry, Mr Assistant Speaker. I am sorry, Mr Assistant Speaker. I am very passionate about this topic, and I sometimes lose my direction, so I thank you very much for bringing me back to this. I want to explain that in Christchurch we have a huge issue with supply because, let us face it, when you take out 11,000 homes in one fell swoop over several massive earthquakes, we look to the Government to provide leadership in terms of supporting us to open up land that is cheap and supporting us to build a significant number of houses to restore people into homes. You know, there are still people who are living in damaged homes 4 years on.

We look to the Government to provide some leadership around supporting our construction industry. I know that the Government feels it has done a lot, but it has not done enough. One of the issues that the Government has not really looked at is providing support for those people who have to travel significant distances to get to work—people who are very much doing what they can do to get by.

I want to get back to the point around affordability and the fact that this bill will allow people to take the Government contributions out of their KiwiSaver accounts. What happens with my 23-year-old daughter if she takes advantage of that? That $1,000 in 40 or 45 years’ time will have built quite a nice little nest egg. I take the view that superannuation should be about saving for our retirement because, let us face it, this Government is wanting to make the future of our young people very difficult. I thank you, Mr Assistant Speaker. It is the end of the sitting day, and I thank you very much for allowing me to take the call.

I commend this bill to the House.

Bill read a first time.

Bill referred to the Finance and Expenditure Committee.

on behalf of the Minister of Revenue: I move, That the Taxation (KiwiSaver HomeStart and Remedial Matters) Bill be reported back to the House by 28 April 2015.

Motion agreed to.

The House adjourned at 6.01 p.m.