McClay Todd: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeMcClay Todd: Questions for Oral Answer — Questions to Ministers[Sitting date: 06 June 2013. Volume:690;Page:10846. Text is incorporated into the Bound Volume.]1.TODD McCLAY (National—Rotorua) to theMinister of Finance: What measures did the Budget set out in order to address issues of housing affordability in New Zealand?Hon BILL ENGLISH (Minister of Finance): The Government is concerned about housing affordability because of the potential impact of rising house prices on the broader economy and because of the inherent unfairness of planning law that locks low and middle income New Zealanders out of the housing market in our larger cities. The Government has worked with local councils to create accords aimed at giving councils the tool kit to improve housing affordability. The first accord is being negotiated with Auckland Council and special housing areas are expected to be designated later this year. The accord targets 39000 new homes in Auckland over the next 3 years. The legislation is before the House and being debated.Todd McClay: What other measures did the Government take in the Budget to help improve the provision of affordable housing?Hon BILL ENGLISH: The Government introduced the Housing Accords and Special Housing Areas Bill. It also introduced the Social Housing Reform (Housing Restructuring and Tenancy Matters Amendment) Bill. The Social Housing Reform (Housing Restructuring and Tenancy Matters Amendment) Bill will extend income-related rents to community housing providers and transfer needs assessment to the Ministry of Social Development. We have some way to go to repair the damage done by Labour to State housing in New Zealand.Hon David Parker: Is it correct that the Budget referred to in the primary question was passed with the support of Mr Banks who is currently facing charges for electoral fraud in the courts and by Mr Dunne who is no longer the leader of a legal party who is still receiving funding from the Budget that he passed as the leader of a party?Hon BILL ENGLISH: The Budget actually has not passed yet. I expect it will—[Interruption]Mr SPEAKER: Order! The member asked a question; he now deserves to have it answered.Hon BILL ENGLISH: I expect the Budget will enjoy a comfortable majority in this House as it enjoys broad support from the public.Todd McClay: What is the likely impact of the Government’s measures on house prices across New Zealand?Hon BILL ENGLISH: The Government’s measures are aimed at increasing the supply of housing to the market. We would like to see an effect on the marketreasonably quickly. However it will take some time to work through the processes with councils and of course to ramp up construction from the currently very low levels in Auckland at around some 5000 houses a year to achieve 39000 houses over the next 3 years. We would imagine that over the next 2 years or 3 years it will have some positive impact on fast-rising house prices.Hon David Parker: Given that the International Monetary Fund the OECD the Reserve Bank and Treasury all support taxation of capital gains why does he believe he is right and these organisations are wrong?Hon BILL ENGLISH: As I pointed out to the member yesterday those organisations advocate a comprehensive capital gains tax. The Opposition advocates a capital gains tax that exempts most housing. We have discussed in the past in this House the merits—Hon David Parker: I raise a point of order Mr Speaker. My question was not about Labour Party policy. My question was why it is that the Minister of Finance refuses to adopt a capital gains tax when it is recommended by those other bodies.Mr SPEAKER: And I thought the Minister was halfway through an answer that was explaining that. Would the Minister please continue.Hon BILL ENGLISH: The Government supports the existing capital gains tax that applies to those who trade in property and is enforcing that rigorously. It does not support a comprehensive capital gains tax that includes families paying tax on the gains in the value of their house every year. We do not support that and nor does the Opposition.Hon David Parker: Why does he think it is fair to tax income from wages but not tax income earned from capital gains?Hon BILL ENGLISH: What happens in the New Zealand tax system is that capital gain from trading is taxed alongside wages. Of course what the member forgets is that a lot of the people who earn wages see their wealth as being in their house. That is why he like the Government does not support a capital gains tax on the family home. What we do support is changing the planning laws to increase the supply of housing because one of the fundamental unfairnesses in New Zealand is that if you have a high-value house and you are already in the market you enjoy the benefits of compact city planning but if you are outside the housing market you are cut out of housing altogether.Todd McClay: What are some of the risks to the economy from unsustainable increases in house prices and excessive credit growth?Hon BILL ENGLISH: We have only got to look at economies like Ireland Spain and the US to see what happens when property prices rise excessively and then the bubble bursts. It is important that we avoid these if we possibly can. On the way up fast-rising house prices tend to push interest rates up higher than they otherwise would be and push the exchange rate up. When the bubble bursts you get significant damage for those households that lose the value of their asset and a banking system that could be put at risk.