Housing affordability

Tax Working Group Interim Report

You’d be hard pressed to find someone who would deny there is an issue with housing affordability in New Zealand. The Tax Working Group (TWG) acknowledges this and it is reflected in its Terms of Reference, which specifically direct the Group to have regard to housing affordability.

While there is a consensus that there is an issue, submitters to the TWG were divided as to whether the tax system was part of the cause, and if it was, to what extent. The true cause will be a combination of a number of complex issues, which ultimately boil down to a difference between supply and demand (with tax probably more impacting the demand side of the equation).

The TWG has identified options which could lead to additional supply of housing:

  • Depreciation on multi-unit residential dwellings
  • Vacant land and empty home taxes
  • Removal of the “ten year rule” (these are existing tax rules which can provide an incentive to land-bank until the expiry of ten years)

The Interim Report notes that “the extension of capital income taxation (for example, through the introduction of a tax on capital gains from residential property investments) could be expected to have a number of impacts on housing markets, including some upward pressure on the ratio of rents to prices.” The Interim Report also foreshadows that any increase in rents would give rise to higher accommodation supplements being paid by the government. The flow on consequences to the housing market will need to be carefully considered as part of the deliberations on the extension of taxation of capital income (EOTOCI).

Housing affordability recommendations:

  • Consider some options which could lead to an increase in housing supply
  • Consider impact on housing affordability when making recommendations regarding capital income


Some statistics about housing in New Zealand

  • In 2017 54% of households in the lowest income decile live in a home owned by them or a family trust
  • In 2017 78% of households in the highest income decile live in a home owned by them or a family trust
  • In 2013 33% of Pacific Peoples owned their own home
  • In 2013 43% of Māori owned their own home
  • In 2013 70% of Europeans owned their own home
  • In 2013 the percentage of dwellings rented ranged from 27% in Tasman to 41% in Auckland and 43% in Gisborne



Find out more

Tax Working Group Interim Report

Deloitte's perspectives
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