Dawn chorus: Where's the population growth and wealth tax permissions?

Parker plans to replace RMA with three new acts in quest for new housing, but council financing and social license blocks remain; HortNZ objects to new 'urban sprawl' houses on veges land

TLDR: Morena. David Parker unveiled plans yesterday to repeal the RMA and replace it with three new Acts by 2023, but the massive reform to urban planning and environment laws are unable to deliver the necessary housing supply without first dealing with the politically untouchable roadblocks of population policy, infrastructure funding and the need for a wealth tax.

Elsewhere in the local political economy, HortNZ called on the Government to protect over 38,000ha of land on the fringes of city from housing developments, saying it was needed to growth veges. And a landlord advertised a two-bedroom former motel unit in Tokoroa for $770/week.

Overseas, overnight, the US Federal Reserve reiterated it would keep stimulating with US$120b of money printing a month to try to ‘over heat’ the economy to get inflation above 2% for a significant amount of time, in part to offset the long period it was under 2%. It is much less worried about an inflationary outbreak than many others. That means low interest rates globally for even longer.

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In our local political economy

David Parker announced more detailed plans yesterday to replace the Resource Management Act with a Natural and Built Environments Act, a Strategic Planning Act and a Climate Change Adaptation Act within the current Parliamentary term. He argued the new laws aimed to improve the environment, give Māori more say and improve housing supply.

Labour’s Parliamentary majority and a wide consensus for the need to replace the RMA mean those laws are likely to pass before 2023, but they leave the core blockages to housing supply in place. Councils and the central Government don’t want to ‘subsidise’ the cost of new infrastructure for housing through higher rates and taxes, partly because there’s never been an open debate or societal approval for very fast population growth and how it is paid for.

In my view, ratepayers and taxpayers generally are refusing to pay their share of infrastructure costs to increase housing supply because voters in both Council elections and general elections have never given their social license or permission to pay broadly for the infrastructure costs needed to cope with very-fast population growth in the form of higher taxes and higher rates.

Three elephants to slay first

There are three elephants in the room around housing supply and RMA reform that have not been addressed or agreed to in any clear democratic form. Without the social license to deal with them, repealing and replacing the RMA is likely to be a pyrrhic victory. Those elephants are:

How fast should we grow our population? It has grown much faster than planned for the last 20 years and there is no plan or debate about what it should be for the next 20 years. The default position is fast growth of 1-2% per year (50-100k/yr) as seen over the last decade, with potentially even faster growth of 2-3% (100k-150k) if New Zealand is swamped with returning ex-pats and freaked-out skilled people wanting a competent and stable place to live after Covid-19 over the next decade. National, Labour and the Greens don’t have population policies, particularly around any limits for temporary skilled migrants, or any sort of residency limits.

Who should pay for the agreed growth level and how? Should we tax wealth, income, rates or spending broadly so the cost of all the infrastructure necessary for the next million residents (let alone the last million new residents) is smeared equally across all ratepayers and taxpayers? Or should it all be loaded up on the buyers of new houses through development contributions and targeted rates to fund special bonds for new greenfield and brownfield developments. The default position from both major parties has been the latter for the last 30 years and it got us into this mess.

Treasury and both sides of politics are trying to tweak that current default setting via the Infrastructure Funding and Financing Act passed last year. In my view, tt won’t work at the necessary scale or speed because our bond markets are not as deep or sophisticated as the models (the United States, Britain and Australia) the Act is based on. Much of the infrastructure needed is too fragmented and small to be paid for with this system. It also front-loads the high cost of infrastructure onto the ‘marginal’ house supply that sets the price for the whole (very inelastic) market. It also relies on Councils to take the initiative and have the skills to make these work.

Should we tax wealth to pay for the infrastructure needed for that population growth? The eternal and painful debate about a Capital Gains Tax over the last decade is an example of how that social license has not been obtained. In my view, the clearest, fairest, fastest, simplest and most consistent way to raise revenue to pay for the infrastructure is a broad-based and low rate land tax designed as a hypothecated payment to fund housing and climate change infrastructure.

A 0.05% tax on land values in urban areas would raise around $5b per year and support $250b of crown debt raised over the 100-year life of these assets. It would smear the cost fairly across those who have benefited most from the quadrupling of urban land values over the last 30 years and fund the infrastructure needed for the two million increase in our population likely between 2000 and 2040. No one is suggesting this.

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Ka kite anō

Bernard

PS: Apologies for lateness today. I am travelling to Auckland.

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