Graham Adams: Housing – Ardern’s divide-and-rule tactics

Graham Adams: Housing – Ardern’s divide-and-rule tactics

The Government has cleverly shifted blame for its own failings onto landlords. That’s the argument of Graham Adams, who says the demonising of landlords is simply about political management rather than actually fixing the housing crisis.


South Auckland councillor Efeso Collins remarked early this month that Jacinda Ardern had abandoned the collegiality of “the team of five million” and entered her “post-kindness phase” after she blamed South Aucklanders for sparking an unpopular week-long lockdown.

Casting aside her usual stance espousing the forgiving precepts of the New Testament, Ardern suddenly adopted the mantle of an Old Testament prophet, telling rule-breakers they would be “facing the full judgment of the nation”.

Unfortunately for Ardern, her punching down backfired. It was interpreted in many quarters as an attempt to shift the blame for the government’s lack of effective contact-tracing onto people who were mostly doing their best to follow sometimes confusing instructions.

Now, faced with relentless criticism over a housing market spiralling out of control, Ardern has again used the strategy of blaming others, but this time the deplorables are “property investors and speculators”. Both these terms have been used in government communications, which is undoubtedly a deliberate ploy to have the latter taint the former by association.

Just a month ago, however, demonising residential property investors — which largely means landlords — wasn’t her preferred way of tackling their influence on house prices even though she acknowledged they were “adding a lot of heat to the market”.

In a television interview on February 27, Ardern still seemed to think landlords were capable of personal growth and enlightenment if only they could see a better and more socially responsible path forward. She recommended they think about alternative ways to “contribute to the productive economy in New Zealand”.

“By going into an overheated housing market, it makes it so much worse for others and you won’t necessarily get the long-term benefits that we’d like you to get.”

Last week — after the median price in Auckland had surged by $100,000 in February alone — her forgiving, understanding approach changed dramatically with a crackdown on the aforementioned property investors and speculators.

On March 23, Ardern announced an extension of the bright-line test on the purchase of any rental property from five to 10 years as well as the removal of the ability to deduct mortgage interest as an expense in an effort to “tilt the balance towards first-home buyers”.

The rules allowing a tax deduction on mortgage interest were deemed to be a “loophole”.

The official press release — put out under the names of Ardern, Grant Robertson, Megan Woods and David Parker — began: “The government has announced a housing package that will increase the supply of houses and remove incentives for speculators, to deliver a more sustainable housing market.”

It is obvious the term “speculator” — with its connotations of self-interest, recklessness and greed — was used with the intention to tar everyone who buys a rental property with the same brush because there is very little in the package that would affect most speculators.

In a laughable attempt to deny this obvious fact, Grant Robertson claimed in a newspaper op-ed published this weekend: “Doubling the bright-line test reduces the attractiveness of flipping homes to speculators.”

“Flipping”, of course, means to resell a property at a higher price within a few months — not five or 10 years.

Similarly, a speculator is likely to assess an extra tax payment of, say, $100 a week for a property as a relatively trivial expense compared to the quick capital gains they are gambling on.

Furthermore, asserting that using a standard tax deduction is exploiting a “loophole” unfairly implies a house buyer is opportunistic and certainly not acting in the spirit of the law even if such behaviour is technically legal. (Robertson used the word “loophole” five times in his op-ed.)

In interviews, Robertson, Megan Woods and David Parker have echoed the Prime Minister’s phrasing in what is clearly an agreed Cabinet line aimed at demonising landlords. It doesn’t seem to matter to them that most members of the landlord class are “mum and dad” investors with a family home and a single rental who are often trying to ensure a retirement income for themselves.

Attacking “speculators” is a reliable tactic, of course, for any government keen to deflect attention from their inability to control market forces and their own mismanagement of the economy. Ardern didn’t go as far as Venezuelan President Nicolas Maduro, who once vilified currency traders as “parasitic bourgeois speculators”, but her message was not dissimilar: Landlords are the enemy of the people — or at least the enemies of first-home buyers.

Or, to adapt her own turn of phrase: Landlords are not us.

Assessed simply as a divide-and-rule tactic, it appears to have worked brilliantly. In the days after her announcement, social media lit up with hostility against landlords — including a tweet by senior Green MP Julie Anne Genter that read: “Cry me a river”, above a screen shot of a news snippet: “Landlord bosses have expressed shock and dismay at today’s government announcement to axe interest deductions on rental properties.”

It is difficult not to view the housing package as a cynical attempt to shift blame for the government’s own failures to make housing more affordable — as Ardern promised in 2017 — onto landlords.

These failures include the embarrassing implosion of its flagship housing policy, KiwiBuild; a progressive home ownership scheme that has only helped 12 families; and a social and state house waiting list that has exploded from 6182 households in December 2017 to more than 22,500 now.

It is also a handy way of deflecting attention from another significant reason for the disastrous housing shortage pushing up house prices and rents: the hundreds of thousands of non-citizen immigrants who have poured into the country on Ardern’s watch — despite her leading voters to believe during the 2017 election campaign that she was committed to slashing numbers.

If she was serious about cutting house prices significantly, she would have announced a strict cap on non-citizen newcomers once Covid restrictions were lifted that would remain in place until the building industry caught up and there were enough dwellings to house the existing population at a reasonable price.

Ardern has also been personally responsible for reinforcing the belief that buying a house is a one-way bet. Even when asked directly, she has gone out of her way to avoid saying she wants to see a fall in house prices despite the fact that it is clearly impossible to achieve affordable housing without a significant drop.

It is little wonder therefore that the market is running red hot given the Reserve Bank is helping banks to hose the housing market with low-interest loans and the Prime Minister is offering an implicit guarantee to house buyers by insisting that the government wants prices to rise, albeit at a more moderate and sustainable pace.

The Reserve Bank, of course, wanted house prices to climb in the wake of Covid’s economic impact in order to maintain the “wealth effect” — which is a form of trickle-down economics based on evidence that as homeowners’ equity rises they are more likely to spend and help an economy from becoming moribund. Rising house prices also stimulate the house construction industry, which is a big employer.

The fact that house buyers have responded enthusiastically to these signals among a tsunami of cheap cash is no reason to try to turn the rest of the nation against one particular group among them. As Ardern has said repeatedly, a plunging housing market risked a greater financial collapse.

Perhaps predictably, the Prime Minister’s attempt to demonise a section of society has not worked entirely in her favour. She had no doubt expected to be feted as the champion of first-home buyers — as indicated by the title of the press release put out on March 23 under her name: “Government housing package backs first home buyers”. But media attention has quickly switched to the plight of renters as collateral damage in the government’s attempt to halt the surge in prices.

Tenants fear that landlords will raise rents to claw back some of their lost revenue — meaning the tax changes to mortgage interest may effectively become a tax on tenants. And higher rents would only make it harder for would-be first-home buyers to save a deposit.

The new housing policy doesn’t offer any obvious hope to first-home buyers. Even Grant Robertson admitted in interviews over the weekend that he had no idea if the policy would work. The most he could say was that he wanted to see an end to “big, big jumps in house prices”.

Which is manifestly not the same as making housing more affordable.


Graham Adams is a journalist, columnist and reviewer who has written for many of the country’s media outlets including Metro, North & South, Noted, The Spinoff and Newsroom

This article can be republished under a Creative Commons CC BY-ND 4.0  license. Attributions should include a link to the Democracy Project.