30-12-1899

Political Regulatory Update February 2007

1. News
2. 1999
3. December

Parliament resumed proceedings for 2007 earlier this month.

Some key personnel changes that have occurred that are of interest to the Federation include:

• The retirement of Don Brash. He was replaced by Katrina Shanks of Wellington from the National Party's list. Shanks takes on the roles of Associate Spokeswoman for Commerce and Associate Spokeswoman for Economic Development. She also joins the Social Services Select Committee (replacing Anne Tolley). The Committee has responsibility for housing related issues.
• Georgina Beyer also retired from Parliament and has been replaced by Southland union organiser Lesley Soper. Beyer was formerly Chairman of the Social Services Select Committee. The new Committee chair is Russell Fairbrother.

Speculation surrounds the future of Labour Party minister Dover Samuels. He is understood to be close to resigning his ministerial portfolios to shift to the back bench. Samuels is currently the Associate Minister of Housing.

Frontrunners for promotion is first-term MPs Shane Jones and Maryan Street. The latter is well known to the Federation with her recent private members’ bill proposing landlords insure their tenants.

PMs ANNUAL STATEMENT

Opening this year’s Parliamentary session the Prime Minister outlined the Government’s work program.

Housing policy areas of interest to the Federation include her announcement that the government.

• Will continue its policy of income related rents
• Will continue to upgrade social housing stock
• Move to increase the supply of affordable housing and from
• 1 July implement the KiwiSaver Scheme that encourages savings for first home ownership, (as well as for retirement).

MORTGAGE LEVY - Mooted

During the month the media reported that Finance Minister Michael Cullen had expressed interest in a levy on all mortgages on residential property.

The rationale for the levy was that it could help control inflation, exchange rates and dampen the housing market.

The levy proposal was first put by the Reserve Bank and Treasury in a April 2006 report on “Supplementary stabilisation instruments”.

Of points of note:

• There is no international precedent for the policy
• National Party finance spokesperson Bill English is not convinced such a move is necessary
• A levy could add one to two percentage points to the interest rate - no one would take out any fixed rate mortgages
• Over 1 million loans would be affected

Clearly, a mortgage levy of any sort would be hugely negative for investment property and possibly political suicide for the Labour Party.

Beyond this, the risk for the Federation is that the levy concept brings into the wider debate other policy weapons available to the Government to attack investment property holdings including: the imposition of a Capital Gains Tax, stricter tax deductibility rules, and tougher bank lending ratios. Unsurprisingly, the Green Party and the Alliance Party are both in favour a CGT.

Two policy weapons that are extremely simple to implement and politically do-able is the ring fencing of loses (ie disallowing losses on investment properties to be offset against other income; wages/salary) and the taxing of the sale of a non owner-occupied property and or a property owned for less than, say two years.

Separately, it is noted that the government is still conducting a review of General and Limited Partnerships structures. Key for some property investors is the on-going discussion around the future of LAQC holding entities.