It was a coincidence that a long delayed meeting with Labour’s Housing spokesperson, Phil Twyford, should take place yesterday morning over the road from the Reserve Bank where Governor Graeme Wheeler would a couple of hours later announce a 25 basis points drop in the official cash rate.
The problem for Twyford is that so much that drives the housing market is beyond any politician’s immediate control.
Though the response from the trading banks to Wheeler’s cut has been slow (the ANZ cut by only 10 basis points; the others have yet to announce any cuts) inevitably the cuts will add further fuel to the Auckland housing market.
And Twyford knows that every time prices rise in Auckland, Labour’s core constituency miss out.
They can only stand and watch the Auckland housing market continue to bubble.
“It has all the different elements so that you’ve got people living in cars and caravans which I think New Zealanders are deeply uneasy about; that there’s that squalor in the 21st century,” he says.
“And then right through to the widespread feeling among our kids’ generation that they have no chance of owning a home in Auckland unless Mum and Dad are willing to write a very big cheque.
“That’s very corrosive of people’s feelings of opportunity of having a future in New Zealand.”
And things are not going to get much better in the short term.
The Reserve Bank’s first Monetary Policy Statement for the year, which was released yesterday morning says record immigration combined with limited housing supply in Auckland along with low interest rates had supported increases in house prices.
House price inflation had slowed since the introduction of the tax measures in October and tighter controls on mortgage lending in Auckland in November.
“It is too early to tell whether this moderation house price inflation will be sustained,” the statement says.
In a way Labour has disarmed itself in this battle by deciding to put the capital gains tax it went into the last two elections with on the table.
Finance spokesperson Grant Robertson earlier this year told POLITIK that Labour could consider extending National’s “brightline” capital gains tax out to five years.
But that’s as far as they would go.
This leaves Twyford scrambling to find a way to deal with the pervasive idea in New Zealand that property is a preferred investment option.
“Cracking down on property speculation is one of the things we have to do if we are going to turn this around,” he says.
“There is no question in my mind that there are four or five things we have to do and cracking down on speculation is one of them.
“We have said we are going to ban non-resident foreigners from speculating in housing and what we will do in Government is explore all the other legislative and policy things that currently drive vast amounts of capital into basically unproductive speculative real estate market which is damaging for home ownership and also the wider economy.”
But that’s about as specific as it gets.
“We’ve said we’re not looking at wholesale reform going into the next election,” he says.
“We’ll do that in Government when you’ve got an army of public servants.”
Meanwhile there is the foreign buyers’ ban on which Labour is currently hinging its opposition to the Trans Pacific Partnership.
And, of course, Mr Twyford, made a controversial entry into the debate on foreign buyers last July with his release of statistics based on Chinese sounding names of house buyers in Auckland.
Now, over six months later he is prepared to concede that it was “a less than masterful piece of political communication” and he is careful to emphasise that he is talking about non-resident foreigners.
And that was the point of it though he says that offshore money probably accounts for 5 – 10% of the housing market.
However even that amount, he argues, has an impact at the margins of what is a market facing very tight supply constraints.
Labour plans to address those supply constraints with its Kiwibuild policy which would see 10,000 modest, “entry level” homes built every year for 10 years by Housing New Zealand onsold to private buyers.
That too poses its own challenges and Twyford concedes that the Resource Management Act is going to have to change to make it easier to build homes both within and without Auckland.
An op-ed piece he wrote with New Zealand Initiative Director Oliver Hartwich argued three issues needed to be addressed if house supply were to be increased:
- Urban growth boundaries driving up section costs.
- Anti-density restrictions stopping affordable housing.
- The expensive and inefficient way we fund infrastructure.
The RMA changes will take care of the first two issues and Labour is proposing spreading the cost of infrastructure over the assets’ lifetime, either by issuing local government bonds or establishing Community Development Districts.
The piece got a favourable reception including some praise from Finance Minister Bill English.
It certainly went some way to reversing the concerns about his political judgement that emerged after the Chinese names.
Twyford sees himself inside the Labour reformist tradition which had always had housing as one of its principle focuses and therefore in a line hat descends from the first John A Lee and the first Labour Government and their promotion of state houses and the creation of the State Advances Corporation.
“Why I feel so strongly about housing is that it is such a fundamental human need.
“When we don’t get housing right the rest of the place falls apart.
“It takes a terrible toll on people’s lives when they can’t afford the rent or they’re living in a sleep out because they can’t afford to rent a house.
“We do believe in the Kiwi dream of affordable homeownership.
“It’s something that’s worth fighting for.
“So these are very traditional Labour concerns that go right back to Micky Savage and the first Labour Government.”
He is promising that the next Labour Government (in which he most definitely wants to be Housing Minister) will see the biggest overhaul of housing since the 1930s.
Twyford is now firmly established on Labour’s front bench. He is one of the party’s better debaters and along with Annette King he is regarded by the Government as one of a minority of Labour spokespeople who really have got to grips with their portfolios.
With his background in political activism in Oxfam and as a Labour Party insider he is one of the key members of the party in Parliament.
Ask him how far he wants to go and there’s a pause, then: “My goal is to be a senior Minister in a successful multi term reforming Labour Government.”
And if he does become he will have his work cut out trying to tame the housing market.
But if he can do it, his party will owe him big time.