Twyford Phil: Taxation (KiwiSaver HomeStart and Remedial Matters) Bill — First ReadingText is incorporated into the Bound VolumeTwyford Phil: Taxation (KiwiSaver HomeStart and Remedial Matters) Bill — First Reading[Sitting date: 04 December 2014. Volume:702;Page:1178. Text is incorporated into the Bound Volume.]PHIL TWYFORD (Labour—Te Atatū):The general theme of the Labour contributions to this debate is going to be the utterly bankrupt and failed housing policy that this National Government has presided over for the last 6 years. And this bill is probably the single best and most successful part of that bankrupt and failed housing policy.Grant Robertson: Low bar.PHIL TWYFORD: It is a very low bar Mr Robertson. What this bill does is allow people to break open their KiwiSaver accounts and extract the member tax credits. You know that is arguably something a lot of people might want to do. It is arguably something that gives people—first-home buyers—more flexibility so they can use the Government contribution in their KiwiSaver accounts to get a deposit together.Hon David Parker: Spend it not save it.PHIL TWYFORD: But that is the downside as Mr Parker said—that they are spending that money instead of saving it and are therefore undermining the bigger policy objectives of KiwiSaver. But what I want to focus on is just how useless the HomeStart policy is which this bill is designed to enable.Let us talk about the HomeStart policy. It was announced in the heat of the last general election campaign. National was desperate for something that would counter Labour’s popular KiwiBuild policy and so it came up with the idea of throwing taxpayer subsidies at an overheated property market where demand already exceeds supply—it reached into its store of bankrupt and failed policy ideas. This idea of subsidising first-home buyers was tried and discredited in Australia. Treasury opposed it. I understand actually that Bill English opposed it in Cabinet. He did not like it but he was overruled by Nick Smith Steven Joyce and others in the National Cabinet who were desperate—who were desperate—to throw some money at first-home buyers in the final weeks of the election campaign.So there are two things that the HomeStart policy does. The first is that it lifts the price cap for houses that first-home buyers can build using these subsidies—for example in Auckland it lifts it from I think $485000 to $550000. That will significantly increase the number of people who can avail themselves of this subsidy and as Treasury has said: “The impact on the proportion of owner-occupiers is expected to be small as most recipients of a HomeStart grant would have purchased a house eventually anyway. While the grant will make a material contribution to first-home buyers’ ability to raise a deposit it makes no difference to the cost of servicing a mortgage and with mortgage rates expected to rise higher than 7.5 percent over the next 2 years higher finance costs are likely to reduce the number of first-home buyers able to purchase their first home.”It is a self-defeating policy. It will actually increase the total costs of homeownership for first-home buyers. It stokes demand in a market where demand already exceeds supply. That is why Treasury advised against it. That is why all of the critics panned the policy when it was announced and that is why the policy has been discredited in Australia.The second key aspect of this policy is that it doubles the subsidy available per first-home buyer from $5000 to $10000 if they take on a new build. The idea is that somehow an extra $5000 per first-home buyer or double that for a couple—an extra $10000—will be enough to convince an aspiring first-home buyer to take on the massive cost time and logistical burden of doing a new build. And the question we have to ask ourselves is: will it actually make a difference?Nick Smith is going to stand up and say that this legislation will stimulate supply because he is so desperate having gazetted 80 special housing areas and having issued I do not know how many press releases projecting thousands of consented subdivisions sections and houses out into the long-run future. I think only 18 houses will have actually been built by Christmas in the special housing areas. He is so desperate to get the private sector to try to actually build some houses that he is hoping this measly little subsidy is somehow actually going to get the Auckland land bankers to stop sitting back on their porches watching the land values of their land in the special housing areas go through the roof and start actually building houses.Well Nick Smith is on a fool’s errand because he must know that all of those developments are planned 2 or 3 years in advance. So all of the developments that are currently on the drawing board in Auckland in his special housing areas—they are all houses. They are 200-square-metre houses on 600-square-metre sections. They are going to sell for $800000 or $900000. No one is building the kinds of houses that first-home buyers can afford or that will come within the $550000 price cap in Auckland. So this is doomed to failure at least for the next few years. It will not solve the acute political embarrassment that Nick Smith faces wherever he goes in New Zealand where he gets constantly asked how many houses have been built in the special housing areas. And this is the problem that National members have got: their only response to the Auckland housing crisis is the housing accords where they have drawn a whole lot of lines on a map called them special housing areas and fast tracked the consenting with Auckland Council somehow hoping that that broken market will fix itself.Well it has not and no amount of press releases photo opportunities and extra special housing areas is going to intimidate the Auckland land bankers into actually getting off their chuffs and building houses and this will not do it either. But the policy overall will stoke demand generally and that is what Treasury has said. That is what all the commentators have said—that it will actually make matters worse.So what have we got in terms of the National Government’s response to the Auckland housing crisis? What have we got? We have got the special housing areas that have delivered I think up to this day five completed houses in 12 months. What we know from the Government’s own figures from the National Construction Pipeline report that Nick Smith put out a few weeks ago and from the briefing to the incoming Minister is that even if Nick Smith’s heroic projections of the number of houses that would be built over the next 5 years are met—and it looks like they will not be—there will still be a deficit according to his figures of 18000 houses.The ASSISTANT SPEAKER (Hon Trevor Mallard): Can I just ask the member to sit for a second. He has 2 minutes to go but I would like to ask him in the 2 minutes that he has left to focus on the bill before the House rather than a general Auckland housing debate.PHIL TWYFORD: You are right Mr Assistant Speaker. I should not have called Nick Smith’s projections heroic and I withdraw that comment and I will focus more tightly—The ASSISTANT SPEAKER (Hon Trevor Mallard): What the member will do is he will get on with debating the bill and not discuss the rulings that I have made.PHIL TWYFORD: Thank you Mr Assistant Speaker for that advice. What we know is that this bill enables first-home buyers to break open their KiwiSaver accounts and access the Government contribution—the member tax credits—in order to put together a deposit. That is the key thing about this bill. There are also some changes to veterans’ income replacement payments that we can go into in more detail later on.But the crucial thing is that this bill is part of a policy that is designed to help first-home buyers deal with the extreme hardship and disadvantage that has been imposed on them by this Government’s utter failure to get a grip on the Auckland housing crisis. It is the disadvantage that has been imposed on them by this Government’s backing the Reserve Bank into corner and forcing it to impose loan-to-value ratio lending restrictions that have driven 25 percent of first-home buyers out of market. They have disappeared. They have gone because they cannot possibly hope to compete in a market like Auckland’s where house prices in the last 12 months have gone up by more than $62000. They cannot compete in a market that is as overheated as that with speculators both foreign and domestic basically cleaning up under National’s policy settings.All of the papers that have been released by the Ministry of Business Innovation and Employment and Treasury have condemned this policy and I think we will hear a lot more about that as the debate goes on.