Seymour DavidDAVID SEYMOUR (Leader—ACT): Thank you very much Madam Chair. I'd just like to quickly refer back to the contribution to this committee stage by Brooke van Velden because I think she highlighted graphically and in a way that clearly moved the Minister one of the central problems with this policy of removing mortgage interest deductibility from landlords renting out homes. You see the Minister of Revenue stands up and he says Our goal is to make sure that more people are owner-occupiers and fewer people are landlords with tenants."—that's their goal—and the problem with that is that the people who are currently tenants are collateral damage and some of them are very vulnerable people in very difficult situations. That's the central problem. When the Prime Minister introduced this policy and said that her Government wanted to "tilt the playing field towards first-home buyers" what she didn't say—what she didn't say—was that she would be tilting it away from anyone who was a tenant and I can't work out if this is wilful ignorance or her just having made a political call. I asked the Prime Minister in question time today why did she think that adding extra tax to landlords in a tight rental market wouldn't be passed on in rents and she couldn't explain why she thought that but I think most people can figure it out. If you put an average of $4000 extra tax on to a landlord and the market's tight—and it's not as though tenants can go elsewhere—guess where that cost is going to end up! Paid for by tenants some of the most vulnerable people. Here's the next irony which is that most people who are tenants actually do—as the Minister said—want to become first-home buyers and that means they're saving for a deposit. But if you put a tax on the housing sector and increase the tax on the housing sector then of course you're taking away from their ability to save to be depositors who buy a first home. There you see the own goal of epic proportions that comes from failing to properly understand the situation and the problem and it's worth just stopping to think about what sort of extra cost is going to be put on to landlords and passed on to tenants. Well at the moment if you have an interest cost you can deduct it and if you have a mortgage say on a home of half a million dollars and you have income of $48000 or above then you're going to be paying 30c or 33c—so about a third is your tax rate—and if you have a 3 percent mortgage and you're paying about a third tax that you can no longer deduct then you're paying 1 percent. That's what it costs now because of no more interest deductibility from this legislation. So 1 percent of your mortgage—that's what you're paying. But remember I said that that's with 3 percent mortgage rates. Now I listened carefully to Adrian Orr. It's not always in the best interests of my welfare and health to hear what that guy's on about but the thing he says is that we're going up with interest rates. If you imagine 6 percent interest rates then all of a sudden it's 2 percent of the cost of your mortgage and if you've got a half-million-dollar mortgage then it's not $5000 or $100 a week; it's $200 a week that you have to pass on to tenants. This has got to be the biggest rent-increasing policy that a Government has ever brought through and the problem is that in the rush to help first-home buyers people who are tenants are collateral damage and ironies of ironies people who are tenants often want to be first-home buyers and are saving for a first home. That's why I support the amendments on Supplementary Order Paper 135 put on the Table by Brooke van Velden but that's just one reason. The second reason I support that is actually the changes that are proposed to the brightline test and when I say "changes" I mean "Get rid of it." I should say a little bit more about mortgage interest deductibility because these two policies that Brooke van Velden's amendments would get rid of from the tax law have something in common: a failure to define the underlying problem. You see the problem with falling homeownership rates—and on that we have common ground with the Minister; it has got harder for Kiwis to own their own home—is not the tax treatment. The reason that there is inflation and the reason that people are finding it harder to afford a home is because there are too many people chasing not enough homes. Until you've solved that fundamental problem then these changes to taxes whether it be mortgage interest deductibility or having the brightline test at 10 years or five years or two years or any length of time the only thing you're going to do is redistribute a shortage of houses and change the people who don't have housing based on who the Government's favoured political group is at any time. That's not real problem-solving. That's not real change and solutions. That's politics and that does not make New Zealanders better off. If you come back to this question about mortgage interest deductibility well actually the Minister is right that inflation is not deductible. But you have to ask yourself: why is there so much inflation in housing? Well because there's a shortage. That's the real problem. He's not solving the real problem; he's trying to treat the symptoms of it. Why is it that we have a shortage of housing? Well land-use planning and infrastructure funding building regulations making councils the building regulator—those are the problems that need to be solved. This will not solve them at all. The problem could have been seen from another angle which is that income tax—I claim no expertise in these matters but it appears to be on income and income is revenue minus expenses and interest is an expense. So if having income tax on income which is revenue minus expense with interest being an expense hasn't created a bubble in the price of Toyota Corollas or desks or chairs or anything else that is freely available—and when the price goes up people create more of them—maybe the problem with housing is not the tax treatment that applies to everything the same but maybe the problem with housing was the supply of housing or to be really precise—because I know that the Minister loves to nerd out on this stuff—the supply elasticity of housing and maybe if we fix the real problem we'd be in a better space. But the other reason I think we should support Brooke van Velden's amendment is that it gets rid of the brightline test. I know there's another amendment that I can't support that reduces it to two years and that amendment is also guilty of a failed problem definition. You see the problem with housing in New Zealand is not the length of time that people own them. It's not people that own houses for less than two years or less than five years or less than 10 years. The problem with housing in New Zealand is just there are more people than there are houses and because people are bidding them up the price goes up and they become unaffordable and that destroys a lot of the opportunity that New Zealanders should have. And when the National Party comes along and says "Oh we're going to stop people flipping them." that's not the problem. The length of time people own a house is not the problem here and by the way the problem is not tax treatment because here's another problem with failing to define the problem. You see the problem is there are not enough houses for the number of people and when supply doesn't match demand prices go up. Well in putting Government taxes on rising house prices the prices still rise but it's just that the Government becomes a silent partner in the speculation and we don't want the Government to be a silent partner in the speculation. We want to build more houses and not have a problem with the prices going up so that people can afford them. So getting rid of the brightline test is the right thing to do—not make it two years so Labour can put it back. Labour National Labour National; two-year five-year 10-year—depending on who's in power. We actually want to get rid of it. As Adam Smith said an income tax is intolerable interference into the affairs of people and this brightline test is actually one of the worst because you have to prove where you live for 10 years and it's outrageous. So we want to get rid of that brightline test altogether and we want to restore mortgage interest deductibility for housing because that is allowing us to focus on the real problem."