Auckland’s Housing Bubble solved only by new currency paying for land

11 September, 2013.

To solve Auckland’s housing crisis we have to gradually take land out of the market so that nobody benefits from buying or selling land,” according to Deirdre Kent, a spokesperson for the New Economics Party. “Only when it is recognised that land is a gift of nature and nobody really owns land just the same as nobody owns water.”

“Land of homeowners can be paid for by Treasury with newly created Tax Credits. Homeowners who opt for this must then pay an ongoing fee or land rental to Government. Revenue should be shared by local and central government, and no more rates would be due on that land. The Tax Credits would be good for paying tax or student loans.”

“You can’t stabilise land values by changing loan to value ratios or by any of the other proposed schemes. A Capital Gains Tax is either too weak to have any effect or so strong that nobody sells their property. It is also complicated and expensive to administer. Leaving out the family home means homeowners capture all the windfall from rising land values, when that gain really belongs to the whole society.”

Our scheme is for homeowners that opt in negotiate with government to pay a land rental that is lower, (say by 10%), than their rates plus what they are paying to the bank in interest for their land.

As more and more opt in in the scheme will gradually take land out of the market place. It is similar to leasehold land but because the lease is linked to a land rental index it varies very little over time as it is adjusted annually. The land rent will only change when there is major infrastructure built or the restrictions on land use change. So it will also solve the landbanking problem where people profit from holding land off the market.

“We are not recommending land tax, but an ongoing land rental. That would require annual valuations of land and inevitably would result in disputes. And people don’t trust land taxes because they have to rise as land values drop”, she said.
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