Housing indifference and inequality


New Zealand's housing market represents economic and social mismanagement on a grand scale. Neither of the establishment parties has effective policies to address the problem.
I say "a plague on both your houses".

Indifference has a particular meaning in economics: it's about making choices. You may want two things very strongly (or very weakly), but you would prefer one of them just as much as the other (or just as little). Your preference for either thing is equivalent.

In Aotearoa New Zealand we prefer to invest in housing, rather than other investment vehicles such as stocks, shares and government bonds.  And who can blame us?  The tax and welfare system provide clear economic advantages to property owners and investors.

In a well-managed economy, a safe investment should yield a low return, while riskier investments should yield higher returns.  

Housing is a very safe, low-risk, investment.  It is literally "as safe as houses".  Investors should be indifferent between investing in housing and any other low-risk, low-yield asset, such as government bonds. At least, that's how it should work in theory. 

In practice, investors want both low risk and high return. An investor-friendly government will try to give them what they want: it will sell infrastructure assets, which are high-yielding natural monopolies, to private investors.  And it will be satisfied with a property market that produces large capital gains for "mum and dad" investors.  For many people, high house prices are a sign of success.

Indifference has other meanings too. Most commonly: "To be without interest or concern; not caring; apathetic."  This fairly describes the attitude of the current National Party government, and its supporters, to those members of our society who cannot afford to buy a house, or who live in substandard rental accommodation, or who have no home at all.

Indifference fairly describes how homeowners and our wider society regard people who rent.  Tenants in New Zealand are burdened with taxes that homeowners do not pay; they may be evicted from their homes at short notice, more-or-less at the whim of their landlord; the property may be poorly maintained and allowed to deteriorate during the term of their tenancy; the landlord may periodically raise rents, regardless of local market rates.

In a well-managed property market, people should be indifferent (in the economic sense) between owning and renting a house.  

They should not obtain greater economic benefit from choosing one type of accommodation over the other. Nor should they enjoy different benefits, in terms of security of tenure, quality and cost of accommodation, and the right of "quiet enjoyment" of the accommodation they are paying for.

The housing market in New Zealand is characterised by social and economic inequality between owners and renters, and housing is consequently a source of the unequal distribution of wealth and opportunity in our society.  

Many people have a deep vested interest in maintaining the status quo. Our two establishment political parties; National and Labour, are fearful of the electoral consequences of upsetting those people.

Only one political party in New Zealand currently sees this issue clearly, and is concerned to do something about it, and has policies that will properly correct the imbalance. That is the Opportunities Party, with its policies on taxation and tenancy reform.

As for the others? I am wholly indifferent: I don't care for either them and I wouldn't prefer one over the other.  I wish a plague on both their houses.
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