One-word summary: Pathetic.
I’ve blogged before about National’s staggering denial of the housing affordability crisis. It seems they’ve now woken up somewhat, as they’ve released a housing policy as the flagship policy announcement of their campaign launch.
They claim to have “overhauled” the existing scheme (introduced by Labour in 2007) whereby you can withdraw from your KiwiSaver savings for a deposit on your first home, and many people can get a government top-up too.
In fact, they’re only making a few changes to the scheme:
1) They’re increasing the house price limits – you can now buy a house worth more and still be eligible for the top-up. This is good and necessary, given our skyrocketing house prices. But it will be generally wealthier people gaining eligibility.
2) That’s even more true for the second change: Currently, the top-up is $1,000 for every year you’ve been in KiwiSaver, to a maximum of $5,000. National will double these amounts, but here’s the kicker: only for those buying or building brand new houses.
3) Aside from the top-up, you can currently only withdraw your employee and employer contributions for your first home deposit. National propose to let you withdraw your annual government contributions (max $521/year) too. I’m actually 100% behind this, and don’t know why it’s not already the case – but, again, the people with the maximum government contributions will usually be wealthier.
4) In October, the Reserve Bank introduced Loan-to-Value ratio restrictions, meaning most buyers now need a 20% deposit for a home loan. This has slowed house-price inflation, but also priced poorer people out of the market. Under National’s proposal, first home buyers will now only need a 10% deposit. This will certainly help, but it’s only a partial backing-away from the Reserve Bank’s policy.
I agree with most of the above, and I’m glad the government have stopped ignoring at least one aspect of the housing crisis.
But there are at least five significant problems, which mean this policy completely misses the mark:
Firstly, it’s pretty small-fry. A lot of it is good, but “tinkered” or at best “expanded” is more accurate than “overhauled.” A couple with maximum eligibility will be able to draw $7,294 more of their savings for their house deposit. If they can afford a new house, they’ll also get $10,000 more from the government. They’ll also probably benefit from being able to buy with a lower deposit – let’s round up the total benefit to $20,000. But that’s still only how much house prices inflate in Auckland and Christchurch every few months. (If you’re buying on your own, all these amounts will be halved, except the house cost/inflation of course.)
Secondly, it helps the better-off the most. “Maximum eligibility” does not correspond to maximum need, but maximum privilege. This is already a flaw with KiwiSaver and the home withdrawal scheme – the people with the most to withdraw are those who’ve earned the most since 2007. But it’s compounded under National’s proposals.
Even more significantly, while the proposed expansions let normal buyers withdraw more of their own savings, they give an extra hand-out of $5,000 per person free money to those who can afford to build or buy new houses. How many people do you know who can afford a new house, let alone for their first home? If you can think of anyone, I’m guessing they either have parental assistance, inherited wealth or very high-earning jobs (you can earn quite a lot and still be eligible, btw). Acknowledging that even these privileged people need help buying homes is admission that our house prices are out of control. But it’s disgusting that the less-well-off are denied this generous and much-needed hand-out.
Thirdly, National’s numbers look impressive by themselves (90,000 helped! Thousands of $ of support! Only costs $218 million!), but if you actually whip out your calculator and analyse them, you’ll notice that only the 10,000 luckiest will be eligible for the big bucks, their mortgages will still be officially classified as 150% unaffordable, and even with these big benefactors pushing up the average, the average assistance is only about $2,000 per home-buyer.
Fourthly, this only helps people buy their first home; it doesn’t do anything about the investors with multiple homes, crowding the market and pushing both rents and house prices sky-high. Unlike in most other countries, you can still “earn” tax-free passive parasite income off other people’s poverty, and unlike Mana, Green and Labour, National don’t see a problem with this (not surprising, since many of them are property investors themselves).
Fifthly, the best National can offer is modifying an old Labour idea, which speaks volumes about their lack of vision. Labour thought up KiwiSaver in the first place, and now they, Green and Mana actually have new ideas to help people into home ownership – and, unlike for National, the most emphasis goes to the people that need it the most.
I thought this Sunday Star-Times article was quite interesting.
Three economists (from Infometrics, the NZ Institute of Economic Research and the University of Auckland) all agree that although the middle classes in the United States have been hit hard since the global financial crisis, it’s not accurate to say that the same is true here.
Despite the myth of the “middle class squeeze” and politicians’ attempts to appeal to the embattled middle classes, in New Zealand it’s the poor who have been hit hardest by the recession (and by government responses to it). The middle classes, on the other hand, have “never had it so good”. While the economists disagree about whether the rich are doing better or worse, all agree about “the growing level of inequality in New Zealand – it’s this chasm between our poorest and richest that’s probably the real issue“.
The article also provides eight stories from middle-class people about how they’ve been coping financially in recent years. Karol at The Standard points out that this undercuts the above points somewhat, because they don’t give any stories of the people actually struggling. Also, the stories are foreshadowed by this rather peculiar statement:
“Of course, this is about statistics – the average. This isn’t you, living from pay cheque to pay cheque, scraping together the school donation, the football subs, the car repayment, the Sky bill, the rent for the bach this Christmas.”
This might be an odd expression of post-modern skepticism about attempts at pure objectivity, and/or it might be ordinary garden-variety dumb reporting. It seems to be saying: never mind the facts, we know that you’re struggling, and an evocative description of your hypothetical woes can substitute for an argument. But maybe they just meant that you may be struggling even though on average the middle class aren’t.
Some of the stories do represent these exceptions… Those who have lost or quit jobs in manufacturing and the public service, or lost houses in the earthquakes, have indeed found things getting tougher, as you might expect. However, they’re all pretty philosophical about it, and even their complaints are about first-world, nice-side-of-the-tracks problems:
“An expensive holiday is shelved and Mr Barton is holding onto his ageing television and car.”
“We were lucky to have steak at all. Sky was going to get the chuck. Any slight luxuries were gone.”
“they hid their financial struggles from their son and refused to withdraw him from private school”
So what’s behind the myth of the “middle class squeeze”? Is it just lazy importing of American complaints, or is there more to it than that?
I think the best way to understand it is to see it as an ideology, in a critical or Marxist sense: it’s a worldview that functions to justify and support the present economic system and current unequal power distributions.
People from all levels almost always feel like they’re struggling to make ends meet, because their expectations rise with their incomes (usually staying just ahead). That’s how market capitalism works; dissatisfaction and desire is what keeps the wheels turning. If people were content with what they have, capitalism wouldn’t work, or at least not the way we know it (maybe it could work in a nicer, more sustainable way).
This malaise is always there; we’re born into it, and too often we let ourselves remain in it. And I guess when we’re constantly hearing about tough financial times and how our class is supposedly suffering, it’s more socially acceptable for middle class people to express it openly.
The ‘Returning Kiwi’, Emily Swan, gives voice to this plight:
Does Swan appreciate that with that income and a house, many Kiwis would see her as well-off?
“Yes! The average household income is what, $30,000? Crazy. But then a lot of people are sending their kids to school without breakfast. We are grateful for what we’ve got.”
And yet . . . “I look at my age and think, I’m nearly 40 and I’m still living from pay-cheque to pay-cheque. What do I pass on to the next generation? Will I ever pay my mortgage off? I do feel like I’ve f—ed up somewhere along the way.
If she’s “f—ed up somewhere”, it’s not in not having enough money; she and her partner earn $130,000 between them, but people earning twice as much probably feel the same way (and some people earning half as much have learned not to feel that way).
Perhaps situations like this can serve as a reminder not only that perceptions don’t also match reality, but also of just how mouldable our perceptions, desires and expectations are. Hopefully we can learn to mould them ourselves to what we think they should be, rather than letting them be moulded by advertising, conformity and the pressures of a consumer capitalist society.