Opinion: Being a New Zealand homeowner isn’t easy – or at least it shouldn’t be.
The geological record of the last century is a symphony of earthquakes that destroyed cities, rebuilt them, like urban hockey – for in and out and shaking it all up.
Such risks should make it impossible to build and insure homes in New Zealand, or at least make them expensive.
But we are a fair and realistic people. Since World War II, New Zealanders have enjoyed the peace of mind that comes with the knowledge that the state heavily subsidizes New Zealand earthquake and disaster insurance through EQC.
This has insulated our housing market from the shaky ground it was built on. Home values have risen thanks to the government’s denial of the fact that all really anyone owns is a patch of dirt that surrounds one of the most wobbly fault lines in the world.
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The EQC system as it was created was more or less fair. It is paid for by a tax levied on home insurance, which means that people who own homes pay the cost of insurance that banks require to grant them a mortgage.
But, as always, there is a problem. The EQC Crown Guarantee means that when the fund that is paying this fee runs out, all taxpayers pay the earthquake insurance bill to the private homeowners. Thanks to seismic activity in the past decade, we are in a period when EQC relies on guaranteeing the crown. This means that taxpayers, whether they own a home or not, insure private homeowners.
In an era when home ownership has become the preserve of the privileged few, questions must be asked about the social licensing of a system in which common taxpayers socially attach risks while private homeowners reap huge rewards in the form of almost entirely untaxed capital gains.
And the system may be about to get worse. Labor is considering recommendations for a landmark review of the Resource Management Act. The review, issued earlier this year, recommended abolishing the Military Articles Act and replacing it with two pieces of new legislation, which Labor said it would like to do.
George Heard / stuff
EQC underwrites insurance in the real estate market
But the report also indicated the need for a third law, which would create a system to manage the cost of climate change for homeowners.
The Labor Party has not yet abided by this legislation, but the word on the street is that the party is somewhat keen on it.
The RMA report is somewhat ambiguous about what the new law will do, initially entitled Managed Regression and Climate Change Adaptation. The only thing that the law will consider is how to deal with the ways in which our towns and cities are retreating from the land vulnerable to the impacts of climate change.
This could be something along the lines of what happened in the red district of Christchurch, where homeowners were offered compensation for leaving property on the land that was no longer safe.
The report acknowledges that affected homeowners or even local government agencies cannot afford these compensation costs on their own, but the central government will need to consider carefully whether it is fair to pass these losses onto future taxpayers, many of whom will never benefit from home ownership. .
The report’s authors say this should be done in a way that discourages “moral hazard” (meaning people move to beautiful beachfront properties with the knowledge that the government will rescue them if things go wrong), and it also needs to find a way to balance the fact that people Those who benefit from the nationally subsidized compensation plan will not necessarily be the people who pay in the system.
The moral challenge for the government is that New Zealanders still indulge in a certain level of self-delusion about what a home really is. In part, we think of home ownership as part of the must-have quartet embodied by former Prime Minister Norman Kirk’s partially fabricated slogan: “Someone you love, a place to live, a place to work, something we wish for.”
Kirk is a fair point, and it raises housing to a level of human right guaranteed by the government.
But the often unacknowledged fact is that for many New Zealanders a home is also an investment; The biggest investment they are likely to make in their lifetime.
New Zealand and its politicians need to determine which of these things really is home.
Residential real estate currently lies in the midst of two completely opposite value systems. If housing is a human right, the government should intervene more to give this right to more than a privileged few.
However, if real estate is just an investment category like any other, it needs to leave the market to do its thing.
The government can and should manage the way earthquake and climate change risks apply to property, but it is the people who profit from speculation in the sector who bear the cost of insuring it.
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