Smoke and Mirrors on Housing
Over the weekend, the National Party announced a plan to assist 90,000 people in purchasing their first home over the next five years. For this discussion, I will set aside the broader economic implications of their policy. (In brief: tackling a supply-side issue with a demand-side approach is merely a temporary fix, not a true solution). Today, I want to focus on the deceptive aspects of this policy.
National’s policy promises that these 90,000 first-time homebuyers could receive up to an additional $20,000 per couple as a grant, not a loan, to aid in purchasing their first home. While there are other components to the policy, this was the main point highlighted.
$20,000! That sounds like a substantial amount! This eye-catching figure was prominently reported, complete with graphics, on at least one television channel.
However, the fine print reveals the conditions: to qualify for the $20,000, both individuals must have been in KiwiSaver for at least five years, their combined income must not exceed $120,000, and they must be building a new home.
In reality, very few will qualify for this grant. National itself acknowledges that only one in nine people affected by the scheme will actually receive the top grants.
Thus, National’s own details reduce the promise from “you can get up to $20,000!” to, at best, “11% of qualifying couples get up to $20,000.”
Ouch.
So, what is the actual average benefit provided by this policy? This is a crucial figure, but one that National did not disclose.
Here’s a simple calculation: National states that the entire policy will cost $218 million over five years and assist 90,000 people in that time frame. Therefore, the average cost per person to the government is $218 million divided by 90,000, which equals $2,422. That’s the average per person. $2,422. After accounting for administrative costs and other expenses, the average benefit will likely drop to just over $2,000 per person.
Ouch.
What impact will this have on housing affordability for young New Zealanders? $2,000 per person in a market where house prices are increasing by tens of thousands each year? Not much.
Typical National. High on spectacle. High on deception. High on illusion. Low on genuinely helping people.