Sharing the rents brings social justice – solution to the Auckland housing crisis

imagesDuring Parliament’s question time there are always a lot of questions about house affordability, especially in Auckland. The National government’s solution to rising house prices is just “release more land”. And the Prime Minister usually replies that home affordability was worse when Labour was in government because that included the period leading up to the Global Financial Crisis. Stalemate. Election year biffo. They then go on to questions about poverty, especially child poverty. In New Zealand, ever since Helen Clark introduced an income support scheme called Working for Families anti-poverty groups have rightly pointed out that as it only goes to families in work, children of beneficiaries are the ones that miss out and that is unfair.

Sadly nobody in Parliament ever raises the issue that when “land owners” monopolise land without paying a full rent to the public for the privilege, the rental they should have paid just capitalises into the market value of their homes. Rent is thus privately captured not publicly captured. That capital gain doesn’t belong to them. The very meaning of “freehold” land is land without rent. When settlers came to New Zealand from England in the late 1800s what they wanted was to stand on a piece of land and know that a landlord couldn’t push them off. But the English colonists brought with them their very entrenched legal system of land ownership and imposed on the Maori a strange concept they called “ownership of land”. It was the land tenure system together with the English banking system which was at the very heart of the colonisation process.

Leaving aside the banking system for the moment, let’s concentrate on the land tenure system. When land is held in common, land tenure is about rights to use land. What the settlers really wanted was security of tenure and they wrongly equated this with a freehold land ownership arrangement. Indigenous people share the rights to use the land with others in their iwi or tribe or in their hapu or subtribe through a complicated system different in each iwi or hapu. Colonisation changed the land tenure system and introduced commercial banks.

We are coming up to a general election and the Labour Party, Mana and the Internet Party are all showing concern to engage and enrol the one million non-voters from last election. The Internet Party rightly makes it easy to join a party and participate, through their clever use of smartphone apps and discussion websites.

But what better way to engage young disaffected voters than to share the land rents? Wouldn’t they be delighted it a political party said it was going to charge a full land rental and share it with them by giving them a Citizens Dividend from time to time?

Let’s have a look at the home values in central Auckland suburbs for a start. Parnell, Mission Bay, Mt Eden, Epsom, Herne Bay, Ponsonby and Grey Lynn houses have risen in value by probably an annual rate of exceeding 10% over the last year. In some cases it is 14%, but let’s take the lower value. An article the other day in the Weekend Herald showed a three bedroom home in Grey Lynn for sale at $895,000 and the subsequent text showed it had probably risen at least $103,000 in the last year. What land tax did that owner pay? Rates contain land tax but actually everyone pays on their capital value these days. (by legislation when the supercity was formed, no choice these days like we used to have). So if every home in the inner suburbs has a capital value rise of say an average of $100,000, just think of that accumulated rental which has been privately captured in the inner Auckland suburbs. This rental rightly belongs to the public because it is government both central and local that has paid for the infrastructure, the hospitals, schools and parks and it is the public which has provided the inner city shops and businesses and activities. Suppose there are 100,000 homes in those inner suburbs each rising by $100,000 in a year. That is a capital gain of $10,000,000,000. Yes it is $10 billion which rightly belongs to the public and we haven’t even tried to calculate the rising value of the CBD and Parnell and Newmarket and Ponsonby shops and offices. This total will be far higher.

Dividing this three-way between central and local government and the 4.4m citizens of New Zealand is the next challenge. But for electoral purposes it would make very good sense to give out a citizens dividend straight away. Let’s, for instance, use $4.4 billion of the $10 billion. That is $1000 per citizen. When dependents get it, the money is taken by the designated carer, usually a woman. So a woman with three children would get $4000 a year from this dividend. Nice one. A young solo mother in Northland or Hastings or Greymouth. Since she is on a benefit she doesn’t get Working for Families. She spends it on the basics of food. The next dividend would bring more. When land rents are shared everyone gains. Labour spokesperson on Welfare Jacinda Ardern would not have to think up anything more complicated than this to right the wrong of children in poverty. It would answer the “Feed the Children” plea of The Mana Party.

I have discovered Fred Harrison's site http://www.sharetherents.org/ where his videos tell a great many stories about the value of sharing the land rent. Fred Harrison is a long time campaigner for sharing land rents.

Labour and the Greens both go into the election advocating a Capital Gains Tax on property that isn’t the family home. Unfortunately the Greens have chosen a 15% Capital Gains Tax. That means when a house is sold (and only then) the Government gets a small fraction of the total rent. The property “owner” gets to keep the 85% that rightly belongs to the public. Well I guess it is a start, but honestly it is an extremely timid policy when you see the whole logic of sharing the rents.

Nobody in this whole debate has raised the issue of how many vacant sections there are in Auckland. If speculators are sitting on sections and not paying much (the council even slashes their rates) then naturally they will continue to speculate. A Capital Gains Tax will only delay the sale even further. You must make people pay for the privilege of "owning" land, or monopolising it. If speculators had to pay a full land rental rather than reduced rates, that would spur them into action. Either they would build or they would sell.

Reform of tax and money system essential for narrowing gap and bringing jobs

So we have just seen the Ikaroa Rawhiti by-election win for Labour with Mana coming in second. The successful candidate Meka Whaitiri has repeatedly said "Our people are hurting. The issues are poor housing, jobs and poverty" Labour has said people are moving from National to Labour because of the rising cost of living.
picture-002

With currency reform and tax reform money will flow into activities that maintain and upgrade assets like houses

If the money system widens the gap between the rich and the poor then a party which ignores this or even understand this will do little to reduce wealth disparity. Explaining this: If money is created by banks as interest bearing debt, but the banks don't also create the interest, then there will never be enough money in the system for everyone to pay back debt. So the losers have to go further into debt. This widens the gap. If in addition the tax system causes wealth to concentrate with property owners and stops money going into investment in the productive sector then a party which ignores this will surely make little progress in alleviating poverty or bringing jobs for the rangatahi of Ikaroa Rawhiti electorate. Explaining this: If we tax labour, sales and enterprise with income taxes, GST and company tax, then the purchasing power of everyone declines. The cost of living rises relative to income. At the same time investment money goes into housing, because there is no tax on land and everyone is betting on rising land prices. A notable example was of an Auckland house which was recently sold by New Zealand Transport Agency for $220,000 above Rateable Value. The housing bubble in Auckland is a serious threat as the Reserve Bank constantly reminds us. Because our party has looked to the root of the issues, and have proposed a well designed domestic-only currency linked to a completely new tax and welfare system, (see http://neweconomics.net.nz/index.php/2013/06/how-to-build-a-life-supporting-economic-system/), only our party can offer serious solutions to the growing wealth disparity and bring real jobs to the Ikaroa Rawhiti electorate.