On National’s Fantasy Trip To La La Landlord Land

How much political capital is Christopher Luxon willing to burn through in order to deliver his $2.9 billion gift to landlords? Evidently, Luxon is:

(a) unable to cost the policy accurately. As Anna Burns-Francis pointed out to him on Breakfast TV, the original ”rock solid” $2.1 billion cost he was touting to voters last year has now blown out to $2.9 billion. (That’s a 38% size error in the calculations.)

(b) unable to provide assurance that this handout won’t simply be pocketed by landlords

(c) unable to explain why Treasury (in research as recent as August 2023) wasn’t citing the loss of interest deductibility as a prime factor driving up rents.

More than anything, the Great Landlords Handout undermines the government’s alarmist talk about the state of the country’s books. The more that Luxon and Finance Minister Nicola Willis bewail the economic “mess” they claim to have inherited, the less responsible the landlord's giveaway tends to look.

Moreover, the credibility meltdown that the Landlords Handout is causing will repeat itself mid-year when the tax cuts package hits the headlines. Again, if the economy is in dire straits (and so starved of resources that we all have to tighten our belts) how can the government possibly justify tax cuts that will disproportionately benefit the already well-off likes of Luxon – and in his case, to the tune of circa $18,000 a year, while low income New Zealanders will receive a relative pittance.

Meanwhile, the coalition government’s changes to benefit indexation will be sucking an estimated $669.5 million out of the welfare system between now and 2028. Luxon’s wishful thinking about the “downward pressure on rents” is going to be more than cancelled out by the upwards whooshing of wealth. Across the board, this seems to be a Robin Hood government in reverse. It is taking from the poor, and giving to the rich.

Footnote One: Here’s Luxon’s train wreck of a Breakfast interview with a calm, composed and persistent Anna Burns–Francis . She’s impressive. In sharp contrast, Luxon’s attempt to portray his handout to landlords as an act of altruism for which renters should be grateful is grotesque.

Footnote Two: For Luxon’s benefit, it wasn’t an anomaly that landlords were previously denied the ability to claim a tax write-off on their interest payments, while other businesses can. The difference- and it is one that Burns-Francis is personally attacked by Luxon for daring to point out – is that landlords don’t pay a meaningful capital gains tax on their property deals.

If you want to talk about anomalies, New Zealand stands alone in the developed world for not having a proper capital gains tax (a) to deter speculation in property and (b) to encourage productive investment. Denying them the interest deduction was all that a timid Labour government could bring itself to do, as a gesture in the right direction.

Now, however… And thanks to the Luxon administration, landlords are getting a free tax ride on both (a) their property speculation and (b) on the interest they pay on the loans to finance those deals. On balance, I think it is pretty clear who should be feeling grateful for favours granted.

Footnote Three: The way Luxon tells it, the Labour government piled all these added costs (healthy homes regulations etc) on landlords. What could landlords do but raise rents and make renters pick up the tab for them running an ethical business?

Supposedly, the new government has now freed landlords from those nasty upwards cost pressures on rent, and – what with interest deductibility now restored – there will (theoretically) be nothing to stop rents from hitting the down escalator. Mind you, Luxon is not promising that rents will reduce.

On past performance, landlords may just pocket the handout, and choose to ignore this fabled “downwards pressure” on rents. But hey, in Luxon’s view, renters should still feel “grateful” because it's the thought that counts, right? And if renters aren’t suitably grateful… Why, they should keep in mind that this same government has given back to landlords the power to kick them out of their homes without the need to provide a cause.

Footnote Four: Talking of thought experiments, the MBIE archive of tenancy bonds is the best index we have of the historical pattern of rent increases. The second graph on this page crudely tracks those changes. I’m not claiming this to be a perfect measure but – compared to Luxon’s evidence-free approach – its rocket science.

For comparative purposes, I looked at average rent increases in the years 2012-2017 inclusive – the last six years of the previous National government, and the six years 2018-2023 inclusive of Labour-led administrations. Keep in mind that the healthy homes legislation became law in July 2019.

Here are the Auckland figures under National:

Auckland rents average in 2012 = $406

Auckland rents average in 2017 = $506

Average increase over six years: $100

And here are the comparable Auckland figures under Labour:

Auckland rents average 2018: $522

Auckland rents average 2023: $614

Increase over six years: $92

So in Auckland, the increase was steeper under landlord friendly, laissez faire National than it was under regulations-happy Labour. The picture is different though, for the nation as a whole:

NZ average rent 2012: $321

NZ average rent 2017: $398

Increase over six years: $77

NZ average rent 2018: $418

NZ average rent 2023: $550

Increase over six years: $132

That’s a sizeable difference. How to explain the Auckland/ NZ divergence? Arguably, the rest of the country had further to go to comply with the 2019 healthy homes legislation. Interestingly though...Winston Peters often talks up his role in moderating Labour’s spendthrift ways, so you might expect that once Labour and the Greens were running the show without his restraining hand, their regulatory zeal would have seen costs passed on to renters at a faster clip.

In fact, the figures indicate the opposite.If you break down the average rent increases of $132 during the entire span of Labour-led governments 2018-2023, only $59 of that amount (44%) came during the 2021-2023 final period of Labour rule. The figures don’t support Peters claim to be a moderating force.

Overall, there is some evidence that rents increased at a faster clip nationally – but not in Auckland – under Labour, but renters nationwide got warmer, healthier homes in return. There is no trade-off for renters in the Great Landlords Handout of 2024. No reason at all to be feeling grateful.

Niger & Mali

In the midst of this terrific article about Mdou Moctar’s new album Funeral for Justice, the ace session musician and sometime Will Oldham collaborator Matt Sweeney makes this interesting comparison between the Niger guitarist Mdou Moctar, and his near neighbour in Africa, the great Tuareg band from Mali called Tinariwen.

...[Sweeney] used Tinariwen, the band whose hypnotically cyclical music is often credited with popularizing Tuareg guitar playing in the United States, as a point of comparison. “Tinariwen’s music is all about drawing you in. It’s meant for you to lean into, like, this magnetic force that’s sucking you in,” he said. “Whereas, the way that the Moctar dudes play, and where they’re from, it’s this blowing, crazy, wild, super-aggressive, outward thing.”

Exactly. Which is why Mdou Moctar is so often compared to that other wild, left handed guitar maestro, and why his band’s music can be a challenging experience for some. Here’s the title single from the new album:

Tinariwen are playing in NZ in late May, presumably as the full electric ensemble. The last time Tinariwen were in NZ, the guitarists got stuck in the middle of Mali’s ongoing civil war, and we got an acoustic set instead. Nice, but not the full spell-binding Tinariwen experience. Here’s a track from their latest album:

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