OnPoint by Keith Ng

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OnPoint: Lies, damn lies, adjectives

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  • Blake Monkley,

    Steve Keen posted a graph showing the cost of housing.

    He also made the comment below which every politician should think hard about.

    If a house is to be a “Money Tree”–a source of unearned income–then there are two sources of that unearned income:
    (1) Somebody else’s income; or
    (2) An increase in debt.

    If everyone in the country is trying to exploit the same money tree–and that is the consequence of everyone expecting house prices to rise faster than incomes forever–then that narrows it down a bit. The sources that make that possible are then:

    (1) Overseas income; or
    (2) An increase in debt.

    Auckland • Since Jul 2008 • 215 posts Report Reply

  • Lucy Stewart,

    They don't seem to consider "not renting" as an option.

    Because, well, for a lot of people it's not? I'm sure there are a great many renters who would buy if they could, but that doesn't mean there isn't a solid core of people who can't afford or for whom it isn't practical to buy.

    That being said, I don't think that's a good reason not to have a land tax, I just don't think we should pretend that renting is optional for everyone.

    And even if it was passed on to renters, it'd be nice to see some calculations on what that would actually mean, given current rents...any way to find out the unimproved value of land in a few example suburbs?

    Wellington • Since Nov 2006 • 2105 posts Report Reply

  • Alien Lizard (anag),

    Ammo and Tamiflu, that's where it's at.

    and body scanners - ask Michael Chertoff
    Patriot Act architect and ex boss of
    US Homeland Security!
    There's brass in fear!

    The Arrrgh Complex • Since Jan 2010 • 158 posts Report Reply

  • Tom Semmens,

    Bringing in a land tax per se might not be a bad thing. But bringing in a land tax - and raising GST - just so rich fat cats can have a tax cut is. The whole thrust of the TWG was to redistribute the tax burden downwards so we can have yet another repeat of failed trickle neo-liberal economic theory. "Fiscally neutral" means nothing of the sort. What it actually means is more taxes for middle and lower class New Zealanders, and a bonanza for our kelptocratic business class who will show their appreciation of the government's closing of property tax loopholes and tax cuts for them by stealing your money in the rigged lottery that is New Zealand's crooked finance and investment markets. And they'll get away with it scott free.

    The enthusiasm with which New Zealanders have flocked to Kiwisaver - gold plated back by the government Kiwisaver - betrays the lie we don't save. Kiwisaver also obliquely indicates why New Zealanders invest in property. The uptake of Kiwisaver shows what New Zealanders really think of the competence and honesty of our private sector business class since 1984. No one really trusts them or their corrupt practices. Land and the government - Kiwi's will invest their hard-earned money anywhere but into the private sector.

    Sevilla, Espana • Since Nov 2006 • 2217 posts Report Reply

  • recordari,

    Um, that should have been "disinterested". The only way any "plenty of MPs" would be "disintered" (sic) is if we have a hitherto well hidden multi-party zombie caucus. Which would explain a lot, but is still implausible...

    AUCKLAND • Since Dec 2009 • 2607 posts Report Reply

  • 3410,

    Landlords will have to pay tax - and may try to pass it on to renters - but at the same time, property prices will fall, making purchasing more viable

    But then wouldn't that mean less rental property available, and therefore further upward pressure on rental housing pricing?

    Auckland • Since Jan 2007 • 2618 posts Report Reply

  • Matthew Poole,

    But then wouldn't that mean less rental property available, and therefore further upward pressure on rental housing pricing?

    Depends. Quite a few landlords own multiple rental properties. If it was one landlord-one rental property, it'd be a fairly easy scenario. However, when there's leverage spread across three, five, ten rental properties, it suddenly becomes desirable to reduce the leveraging in a big way but still hold onto several rentals so that there's an income stream. And, if there's not a CGT, the sale of some of those properties nets a nice capital gain (especially if it's older properties that were bought in the last "trough") and the rents in the remainder can be increased to cover the extra tax.

    I don't buy the doom-and-gloom scenarios about landlords bailing out, to be honest. So they bump the rents a bit, tenants shuffle around the market to find somewhere they can afford, and life goes on. There'll be a period of adjustment, and in five years' time everyone will wonder what all the fuss was about. Of course, that requires National to have the brains and balls to do something that's not easy and isn't good for them personally or for their top-end backers. I won't be putting money on what Key announces will be the medicine we're to be fed.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Matthew Poole,

    And you can rent the house out as a productive asset.

    I think your definition of "productive" differs markedly from the definition of "productive" used by most market commentators. It may be productive for the owner, but it's most definitely not productive for the wider economy. Since this entire debate is about trying to get some tax income out of what has turned into a massive black hole, "productive" is a rather poor choice of word on your part.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Kumara Republic,

    In any case, there'll be few tears shed for the impending demise of the Quarter Acre Cartel.

    The southernmost capital … • Since Nov 2006 • 5441 posts Report Reply

  • Keith Ng,

    Because, well, for a lot of people it's not? I'm sure there are a great many renters who would buy if they could, but that doesn't mean there isn't a solid core of people who can't afford or for whom it isn't practical to buy.

    What I meant is that even if just a small portion of renters could afford to buy, their ability to go "no, piss off" has the ability to drive rent down across the board.

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Andy Fraser,

    Tom

    The whole thrust of the TWG was to redistribute the tax burden downwards so we can have yet another repeat of failed trickle neo-liberal economic theory

    Listen to Bob Buckle on Morning report today made me want to scream . . . . .

    http://www.radionz.co.nz/audio/national/ntn/2010/02/09/new_tax_proposals

    Invercargill • Since Jun 2009 • 33 posts Report Reply

  • Keir Leslie,

    "productive" is a rather poor choice of word on your part.

    I think that's massively confused. Houses are capital which produces something people want: shelter. They're productive.

    (And a house is a productive asset as opposed to say gold.)

    Since Jul 2008 • 1452 posts Report Reply

  • 3410,

    What I meant is that even if just a small portion of renters could afford to buy, their ability to go "no, piss off" has the ability to drive rent down across the board.

    But if that portion of renters move out of the rental market, then so does an equal portion of rental housing, leaving the supply/demand balance the same, no?

    Auckland • Since Jan 2007 • 2618 posts Report Reply

  • Matthew Poole,

    Keir, houses don't produce anything. They simply are. They might provide shelter, but provide and produce are not interchangeable.
    Productive assets employ people to make things or provide services. A house doesn't employ anyone to provide shelter to its occupants, unless you're very, very wealthy and employ a staff, and even that is not actually the same thing. It's not producing anything for consumption by others, which is what one expects of a productive asset.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Keir Leslie,

    It's not producing anything for consumption by others, which is what one expects of a productive asset.

    Shelter not being a consumable good, obviously.

    Since Jul 2008 • 1452 posts Report Reply

  • Matthew Poole,

    Keir, who's employed by residential property to provide shelter? Nobody. Therefore, it doesn't employ anyone to produce goods or services for consumption by others. Ergo, not productive.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Cameron Junge,

    Shelter not being a consumable good, obviously.

    Please clarify for me: are you saying that you consume shelter?

    By consume I mean use, modify, destroy, etc. You know, like how you use a TV & throw it away after 4 or 5 years (when it's worthless), or how you eat a meal, or how you throw away that toilet paper after it's been used.

    I always assumed that consumable goods were things that you use then throw away once you've used them for their purpose. Even cars aren't consumable goods... unless you're Warren Buffet.

    Auckland • Since Jan 2009 • 45 posts Report Reply

  • Keir Leslie,

    There's a surprising number of people involved in the maintenance of the nation's housing stock. But that is the most cack-handed definition of productive that I have ever in my life seen, and trust me, I have seen labour theory of value people try.

    Other non-productive assets under your definition: a fruit-tree. A bee-hive. Etc. Etc.

    (Think: a house is an asset which produces a good. It is a productive asset.)

    (This is all by the way, given that the meaning of a house as a productive asset as opposed to say, gold, is pretty clear.)

    Since Jul 2008 • 1452 posts Report Reply

  • Keir Leslie,

    Please clarify for me: are you saying that you consume shelter?

    Sort of. You can model it as consumable for our intents here, I think.

    Since Jul 2008 • 1452 posts Report Reply

  • Cameron Junge,

    Sort of. You can model it as consumable for our intents here, I think.

    I'm still confused. How do you throw away shelter? After I've used it, it's still usable by someone else (well, unless I've burnt it down, but that's another issue).

    Oh, and a fruit tree produces fruit, that can be sold after it's picked. A bee hive produces honey, that can be sold after it's harvested. Both of those produce a good. Houses don't produce a good or item.

    Auckland • Since Jan 2009 • 45 posts Report Reply

  • Keir Leslie,

    Housing quite clearly produces a good[0]; when I rent a house, I am paying money to get something that I want and need, viz. shelter.

    Now, I should note that I don't particularly care for the idea of consumption[1] here and didn't bring it up. But when you look at it, rent is really a bit like the gas bill, which you would certainly say is consumption. I don't want to get metaphysical, so I shan't argue about using up or whatever. I shall merely observe that it acts like things we call consumption.

    [0] and even if one wants to get persnickety about when the good's produced, it's a matter of accounting exactly how that works.

    [1] because of course the gas/shelter bill could be inputs to another process, in which case one mightn't want to call them consumption.

    Since Jul 2008 • 1452 posts Report Reply

  • Cameron Junge,

    @keir: hate to repeat what's already been said, but I think your definition of consumption & production is not only different to what most commentators would use, but also different to what the common man would use. *shakes head*

    Auckland • Since Jan 2009 • 45 posts Report Reply

  • recordari,

    AUCKLAND • Since Dec 2009 • 2607 posts Report Reply

  • Martin Roberts,

    Putting on my "common man" hat, I am going to throw my lot in with Keir. Adequate housing provides the consumable good of shelter which is a necessary input to generate productive labour capacity. If you don't believe me, try living in a shanty over winter.

    So I reckon a house is productive like, say, and education. If that isn't "productive" in your terminology, then there is presumably another word which applies and renders the prevalent productive/unproductive dichotomy meaningless since it doesn't span the relevant options.

    You can certainly buy more house than is productive, but that is a separate question.

    Are people employed to maintain the shelter "machine"? Yes.

    Do I consume shelter? Yes. Maybe not the house, but the shelter. There's a limit to how many can be sheltered in any single house, and any night's shelter is either consumed or lost.

    Auckland • Since Nov 2006 • 93 posts Report Reply

  • Keir Leslie,

    Identifying what the poor have, rather than what they do not have, focuses on their assets. This paper contributes to the extensive vulnerability/assets literature, by categorizing the assets of the urban poor in terms of an “asset vulnerability framework.” These include both tangible assets, such as labor and human capital, less familiar productive assets, such as housing, as well as intangible assets, such as household relations and social capital. Results from a recent urban study show that the poor are managers of complex asset portfolios, and illustrate how asset management affects household poverty and vulnerability. Translated into operational practice this framework facilitates interventions promoting opportunities, as well as removing obstacles, to ensure the urban poor use their assets productively.

    My emphasis. In Caroline O. N. Moser, The asset vulnerability framework: Reassessing urban poverty reduction strategies, World Development, Volume 26, Issue 1, January 1998, Pages 1-19, ISSN 0305-750X, DOI: 10.1016/S0305-750X(97)10015-8.
    (http://www.sciencedirect.com/science/article/B6VC6-3SX6Y97-1/2/75d03376c47ba8072334c6836a02481c)

    Sometimes housing is treated as separate from other productive assets, but that's primarily for accounting reasons, or because of dodgy economic ideas about assets (the Indian national accounts I think fall into this category, but I could be wrong.)

    Since Jul 2008 • 1452 posts Report Reply

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