First-home buyers look to have come out on top in yesterday’s housing announcement by the Government, according to economic and political commentator Bernard Hickey.
Among the wide-ranging changes announced yesterday, an interest deductibility loophole was removed. This means property investors can’t offset the cost of the interest they pay against their rental income when calculating their tax.
“In theory they’ll [first-home buyers] be able to go into auctions and tenders without quite so many rental property investors competing against them,” Hickey told Breakfast.
But, he added, only time would tell if the new rules would do enough to “turn off those landlords”.
Hickey said local councils were the other winners after yesterday’s announcement, because they could now contest for part of the $3.8 billion Housing Acceleration Fund for infrastructure and public, affordable and mixed housing.
The multi-billion dollar fund is set for a combination of private and Government development of housing, with additional money going to increasing the use of vacant or underutilised Crown-owned land for housing.
“Although, if the Government was really serious, that number would not be $3.8 [billion], it would be $38 billion to really get housing going,” Hickey said.
He said there also wasn’t any talk about how councils could pay for maintaining the infrastructure.
As for yesterday’s losers, Hickey said they were landlords and people who had hoped for more state housing.
He said there was “no action” and no new money to build more state housing.
Those banking on capital gains were also hit by yesterday’s extension of the bright-line test from five to 10 years, he said.
The bright-line property rules taxes money made on an additional house as income, if it is sold within a certain period of time. It does not apply to the family home.
Hickey said the Government had already been “criticised for effectively creating a capital gains tax by stealth” through the bright-line test.
That was probably why it only extended it to 10 years, rather than 20 as recommended by Treasury, he said.
“Politically, the Government decided 10 was as far as they could go.”
Manukau Urban Māori Authority chair Bernie O'Donnell echoed Hickey’s criticism about the lack of detail and action on social housing in yesterday's announcement.
“We exist in the rental market and the social housing space. I would like to see more detail around Māori-specific strategies,” he said.
But, the announcements were a “good start and they’re heading in the right direction”, O’Donnell added.