Last weekend, I announced that Labour will end a tax loophole that speculators use, and invest the savings in insulation and heating for homes. Like the rest of our fresh plan for housing, these policies have generated a lot of interest and questions from Kiwis keen to know how Labour will tackle the crisis. So, I wanted to explain what the loophole is and address some of your questions.
Right now, speculators can take losses from their rentals and offset that against their personal income. It allows them to avoid paying tax. This loophole is effectively a hand-out from taxpayers to speculators to the tune of $150 million a year. It gives them an unfair advantage over Kiwi families when it comes to buying a house, because the taxpayer is helping pay the speculators’ mortgage.
Families don’t deserve to have the odds stacked against them by their own government. They deserve a fair shot. With Labour that’s what they’ll have.
Now, let me be clear. This isn’t about the mum and dad investor who has bought a rental as a long-term investment. The vast majority of them don’t use this loophole. Those that do will have time to adjust because we’ll phase out the loophole over five years.
This policy is about the big speculators who purchase property after property. It’s about those big time speculators who are taking tens of thousands of dollars a year in taxpayer subsidies as they hoover up house after house.
You’ll hear all normal threats and scaremongering from the speculator lobby groups. The same stand-over tactics that we heard over insulation standards and removing depreciation. The truth is, removing this tax loophole won’t affect rents. The rents landlords charge are determined by supply and demand. Removing the tax loophole doesn’t reduce the supply of rentals and, so, it won’t raise rents.
In fact, it is the rampant house prices rises driven by speculators that are pushing up rents. Levelling the playing field for homebuyers by closing the loophole, along with our plan to build affordable homes for first homebuyers, will ease demand for rentals and help bring rents down.
I’m not surprised that speculator lobby groups and National are defending this loophole – they represent the interest of speculators who are pocketing $150m a year. But I would say this: how can we as a society possibly defend handing out subsidies to property speculators when most young couples can’t afford to buy their first home?
You ask me whose side I’m on? It’s families. It’s first home buyers.
Removing the speculators’ tax loophole will save taxpayers $150m a year once fully implemented. We can use that money to do some good, instead of propping up speculators.
So, Labour will invest those savings into grants for home insulation and heating. Homeowners and landlords will be able to access a get up to $2,000 per dwelling to pay for up to 50 per cent of the cost of insulation upgrades and double glazing that meet or exceed the current building code, or of the cost to install a clean, fixed form of heating.
Over a decade, we’ll help make 600,000 Kiwi homes warmer, drier, and healthier.
This is a perfect complement to my Healthy Homes Guarantee Bill that requires all rentals to be up to a standard where they are fit to live in. 40,000 kids a year go into hospital in New Zealand for illnesses related to living in cold, damp, mouldy homes. We’ve got to change that. We can do better.
So, the choice is simple really: do we want to give $150m a year to help property speculators outbid families trying to buy homes, or do we want to invest that money in making our homes warmer, drier, and healthier? For me, there’s only one answer.