The 2023 Election is a class war without the political vocabulary
The 2023 Election is a class war without the political vocabulary.
Bernard Hickey calls it the ‘Dark Heart of NZ’s Political Economy‘, and it’s the Real Estate Pimps protecting their golden goose while Governments simply import fake growth from exploiting migrant workers but not taxing the rich to pay for the infrastructure…
The failure of yet another pre-fabricated house builder1 and a legal threat2 against our biggest council to force more greenfields development are two more signs, if we needed them, that our economy and society are now just a residential land market with bits tacked on.
These two latest events again demonstrate the massive skew in our tax settings in favour of housing land ownership has so changed the DNA of our political economy that nothing really changes without the removal of that skew. They also show the election debate we’re having has yet again failed to address the three elephants in our societal room:
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- residential land will have to be taxed and business investment incentivised to change the land-seeking, inequality-widening and low-capital-investment biases now embedded throughout our economy, politics and society;
- our infrastructure financing and taxation systems are totally broken and inadequate at both central and governmental level, yet no politicians want to have honest conversations with each other or voters about how to fix it by increasing taxes and/or user-pays charges; and,
- the bipartisan and accidentally-on-purpose Government policy settings enabling and encouraging population growth of 1.5-2% per annum through migration of guest workers dominates our economic and societal outlook, and remains undebated and unacknowledged.
…none of this is being acknowledged or debated…
The dominant way that house builders, land owners, land bankers and households make outsized profits and capital gains in Aotearoa-NZ is to buy more land, preferably with a big mortgage, and wait. They don’t need to build a house efficiently, or any house at all. They don’t need to build a profitable business or invest in shares in someone else’s business. It’s always, always about the business of driving up land values and using mortgage debt to increase the leveraged returns, which aren’t available from other investments.
Home owners and land bankers just need that land zoned residential, and can then wait for the leverage, time and the failure of central and local Government to build the infrastructure to cope with regular 1.5-2% population growth to deliver the rents and untaxed capital gains to make the owner far richer than they ever be from saving wages or profits.
Working in a job or profession or investing in a business or managed fund is a mug’s game, compared to the leveraged, spectacular, government-guaranteed, ongoing and tax-free capital gains on residential land. The differences in incentives between investing equity in leveraged-up land and investing equity in unable to be leveraged stocks or business investments are so vast. In other countries, capital gains on land and other asset value increases are taxed, while savings in funds that invest in businesses receive tax incentives, either on the way into the fund or in the fund itself. Savings in our investment funds are taxed throughout.
This royally skewed set of incentives is why our housing market is worth NZ$1.6 trillion, which is four times our GDP (NZ$400 billion), 10 times the value of our listed companies (NZX total market value of $160 billion), eight times larger than our total managed funds sector ($200 billion including NZ Super Fund and ACC) and 16 times larger than our only-very-marginally-incentivised household pension funds (Kiwisaverat $100 billion). For comparison, Australia’s housing market is worth the same four times GDP, but is worth four times stocks, three times and funds under management. In the United States, its housing market is worth twice GDP, once the stock market, twice funds under management and 7.5 times its comparable ‘subsidised’ household pensions market, which is known as 401k in America, rather than KiwiSaver.
This dark heart of our political economy shows up regularly in all sorts of ways, in particular the focus of investors, developers, politicians and equity-rich home owners on greenfields development of clearly-titled and mortgageable plots of land. An actual occupied house on the land is a bonus, but not necessary to be exposed to these gains.
…I told you the Real Estate Pimps were buying this election!
Analysis: Property industry tops political donations
An RNZ analysis of political donations since 2021 shows people involved in the property industry are giving the most – and almost all of it is going to National, ACT and NZ First.
Since 2021, people aligned with the property industry have donated more than $2.5 million to political parties.
More than half of the cash from the property industry went to the National Party (53 percent), followed by ACT (32 percent) and New Zealand First (12 percent). Labour received 2 percent.
Real Estate Pimps have donated millions to National and in return National have lifted the Foreign Buyers Ban and will give landlords the right to kick tenants out with no notice.
National and ACT will also role back Tenants rights while reopening Landlord tax loop holes.
There is a class war on renters but we don’t have the political vocabulary to articulate it, and we don’t have that vocabulary because woke middle class activists have robbed the Broadchurch of class from the debate and produced pure temple of woke identity politics.
As I posted recently, the woke will need to be purged if the cancel culture ammunition they provided the Right see the Alliance of Arseholes win.
By opening NZ up to foreign speculators while reopening landlord tax loops holes, National and ACT are opening NZ up for sale to their overseas wealthy mates.
Let’s remind ourselves just how vested the Landlord class is..
…there is an unspoken promise between the neoliberal State and the untaxed capital gains private landlord class that the neoliberal State never builds enough State Houses to alleviate housing desperation so that the untaxed capital gains private landlord class can exploit that housing desperation ON TOP OF getting a $1.5Billion annual subsidy in the form of the Accommodation Allowance EVERY SINGLE YEAR!
Renters are about to be thrown to the wolves and horrifically the culture war ammunition middle class activists handed to ACT and the Far Right is eclipsing this reality from the vast majority of renters who are not voting or spite voting ACT, NZFirst or National.
Key won 3 terms because he kept overseeing home valuation jumps larger than people’s actual annual salary. National are aiming for the same magic as Kiwis addiction to land wealth and property investment warps all other considerations.
One day there is going to be a vicious reckoning to this rigged Property casino. The reason why the identity politics woke wish to ignore that is because they have benefitted from the rigged capitalism and it’s easier to virtue signal than change the economic hegemony.
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Woke causes are all fine and dandy, but feed the kids first. Roofs over heads, living wages. Support for families. Good health care. A little bit of focus on what is important please.
Vote Green and demand Labour adopt the 3% rent increase cap in return for support.
National is offering to restore the mortgage cost deduction against rent income – this benefits landlords up to $1m each year
(based on 100 homes with $600 a week rent – 3M of income not subject to a $1M in tax because of the mortgage payments made) (the number of homes Luxon wants to own once he can borrow and deduct mortgage cost against rent income) (the born again estate believe in rapture to greater wealth than the rest of us down below).
Simple arithmetic: if the lower sector of people benefits less than the benefit to the upper sector of people then there is a trend to increase the inequality between the upper and lower sectors of people.
“Identifying yourself within a class is a form of identity politics.”
Not really. A class is a description of your material, economic circumstances. It can change in response to changes in the world outside yourself – e.g. if you are made redundant you might be tipped into a lower class, temporarily or permanently. If you receive an inheritance and buy property, this elevates you into a different class.
An identity is something more intrinsic to yourself – once established it seems to be settled more or less. It might change but these are changes within yourself, like getting older, or getting in touch with a different part of your cultural heritage, etc.
If we give primacy to either, or ignore either, things get confused and false antagonisms are created.