These examples of politicians profiting from the housing affordability crisis raise essential issues about conflicts of interest that leaders have in deciding upon housing and tax policies. In making such large profits from their housing investments, the question is whether politicians are reluctant to change the policy settings.
For example, it might be in the public interest to introduce a capital gains tax, but notably both Luxon and Ardern emphatically ruled out such a change. Has their antipathy towards a capital gains tax – or indeed other significant reforms to alleviate the housing crisis – been a case of being corrupted by self-interest?
For example, it might be in the public interest to introduce a capital gains tax, but notably both Luxon and Ardern emphatically ruled out such a change. Has their antipathy towards a capital gains tax – or indeed other significant reforms to alleviate the housing crisis – been a case of being corrupted by self-interest?
Politicians get to keep their capital gains
Ardern and Luxon are accused of pocketing substantial annual salaries (nearly $500,000) while also making comparable money from real estate that isn't taxed. For example, Bernard Hickey makes the point today that Luxon will pay $168,260 in income tax on his $484,200 Beehive salary this year, but he'll pay zero tax on his capital gain of $460,000.
Luxon's $460,000 housing profit comes from the sale of two properties. The first is a rental property in Onehunga, which Luxon bought for $650,000 in 2015 and reportedly sold this month for $930,000. The second is his Wellington apartment opposite Parliament in the Kate Sheppard complex. He bought this for $795,000 in 2020 and has sold it for $975,000 four years later.
1News challenged Luxon yesterday about whether he thought he should be paying tax on the income from these sales, and he replied: "No, we don't have capital gains tax in New Zealand… We think it would be bad for New Zealand because you don't tax your way out of recession".
With other questions being put to him about his profits from the sales, Luxon responded: "I don't know what the point of the questioning is" and he explained further: "We don't believe in a capital gains tax or a wealth tax. We think, for people who actually generate wealth in this country, it's a massive disincentive".
Today the questions on the capital gains have continued. Appearing on Newstalk ZB, Luxon told Heather du Plessis Allan this morning: "if we're going to criticise people for being successful, let's be clear, I'm wealthy and I'm sorted".
He also explained why he sold his Wellington apartment: "I came to politics four years ago. I bought an apartment in October 2020 and then I became prime minister. Normally a prime minister would sell their apartment and move into the Premier House. But because there was basic maintenance that needed to be done I couldn't… Now I'm moving in, and I don't need the apartment, so I'm selling it. That's what John Key did when he became prime minister."
RNZ has also reported that the upgrades that have just been undertaken on Premier House could cost up to $200,000. So far, the invoices have amounted to $170,000 for refurbishments and $15,000 for new items for the house.
Do housing assets give politicians a "conflict of interest"?
The Labour Party have accused the Prime Minister of being in a "conflicted position" because of his windfall. Labour's deputy leader Carmel Sepuloni has connected Luxon's personal fortunes with his refusal to implement a capital gains tax. She told 1News yesterday that because of his windfall, Luxon "should be willing to have a conversation about a more progressive tax policy." Sepuloni also hit out at his housing arrangements, saying: "There's just a general sense of entitlement with the Prime Minister that we have seen."
Luxon has been reluctant to justify himself to the public on his sale of houses. Last month, when the sale of his Onehunga rental came up, he answered media questions on this with a statement from a spokesperson: "The management of the Luxons' properties are private matters which are unrelated to Mr Luxon's capacity as prime minister".
Last year, on TVNZ's Q+A he also told Jack Tame that his significant property ownership didn't impact his judgement on housing policy. Yet, interestingly, his colleague, Act leader David Seymour has suggested otherwise.
During the last National-led Government, Seymour didn't own any property, and he argued that those politicians that do have property are conflicted: "The fact that the average National MP owns 2.2 properties of their own might suggest why they've spent a lot of time introducing solutions that you'd almost suspect weren't supposed to work – because they certainly haven't".
Similarly, then Green Party co-leader James Shaw (who at that stage didn't own a house) said: "The fact that the vast majority of our members of Parliament own multiple properties is quite a good signal for why there isn't a capital gains tax in this country. There's very little appetite amongst the National caucus for a proper capital gains tax."
How many houses do Government MPs and Ministers own?
According to the 2024 "Register of Pecuniary Interests", the average National MP now owns more than 2.2 properties. In fact, National Party MPs are the most significant property owners in Parliament, with interests in 136 properties, an average of 2.8 per MP. The Act caucus has 28 houses – 2.5 houses on average. NZ First's caucus has 14 properties – 1.8 each.
In terms of Cabinet ministers, they own 60 houses, meaning, on average, they have a stake in 3 houses each. Sitting on the top rung, of course, Prime Minister Luxon has until recently owned seven properties – four investment properties, two residential properties in Auckland, and one apartment in Wellington.
The closest behind Luxon is Mark Mitchell, with six properties, again all in Auckland, apart from his Wellington apartment. Shane Jones has the third-largest property empire, with five residential properties in the Far North. Deputy Prime Minister Winston Peters declares three properties—a house and land in Northland's Whananaki and a home in Auckland.
Outside of Cabinet, the National MPs with large numbers of properties are Andrew Bayley (7 properties), Carlos Cheung (6), Penny Simmonds (5), Gerry Brownlee (5), and Barbara Kuriger (5).
Opposition parties own plenty of houses, too. Collectively, the Parliament owns 261 homes, or 2.2 properties each. Of course, the number of dwellings owned varies greatly between MPs. A total of 91 MPs had a stake in more than one property, and 63 had a stake in three or more properties. At the extremes, nine MPs said they own no property, while ten MPs own seven houses.
The public is right to be suspicious of property-owning politicians
Luxon is free to continue asserting that his considerable property wealth and windfalls have no impact on his approach to housing or taxation. But it's probably not very convincing to most people. Even those supportive of the Government and happy that Luxon has been financially successful might still suspect his stances on things like capital gains taxes or social housing construction might be impacted by his own financial situation.
Labour should, however, be careful not to be too petty or partisan in their critiques of the Prime Minister on this. After all, many of their own MPs have multiple properties, too – Jenny Salesa owns five. And the story of Prime Minister Jacinda Ardern, and then Chris Hipkins, ruling out a capital gains tax also should make them pause before they hypocritically accuse Luxon of being self-serving or conflicted.
Yet it does raise a useful question about MPs being so heavily invested in property and whether they therefore try to preserve the status quo because they are personally advantaged by it. MPs are supposed to serve the public interest, not their own self-interest. And so, the concentration of property ownership among MPs and the potential influence this might have on policy decisions, especially in a housing crisis, raises valid concerns about conflicts of interest and erodes public trust.
Key Sources
Sanda Arambepola (Stuff): 'I'm wealthy and I'm sorted': PM makes no apology for capital gains on Wellington apartment
Nicole Barratt (Herald): PM Jacinda Ardern's former Pt Chevalier home sells for $1.32m
Felix Desmarais (1News): Revealed: Luxon set to gain almost $500k on property sales
Bryce Edwards (Democracy Project): MPs own 2.2 houses on average
Bryce Edwards (Democracy Project): MPs' financial interests under scrutiny
Raphael Franks (Herald): Prime Minister Christopher Luxon responds to attention on Wellington apartment sale on Newstalk ZB
Jo Moir (RNZ): Christopher Luxon moves into refurbished Premier House
One Roof: Christopher Luxon $945,000 richer? PM find buyer for his investment property
Esther Taunton (Stuff): Christopher Luxon sells Onehunga, Auckland, investment property
Dr Bryce Edwards is a politics lecturer at Victoria University and director of Critical Politics, a project focused on researching New Zealand politics and society. This article was first published HERE
8 comments:
It's called capitalism Bryce. It works well within a functioning democracy.
We all have the opportunity to better ourselves and it doesn't discriminate.
On the other hand there is socialism a system that destroys human inishitive.
Sepuloni said "There's just a general sense of entitlement with the Prime Minister that we have seen."
Sorry to be thick, but since when was an expectation that the law of the land applied to everybody, Prime Minister or wage slave, a bad thing. If Parliament is composed of people who are representative of the general population, then is it surprising that MPs invest predominantly in property. Everybody else does. Tax law virtually invites it. The general public know that, and MPs are only a subset of the the general public.So they don't need a "sense of entitlement". Just the knowledge that in New Zealand, Jack's as good as his master. Or, when required, the other way around.
Well that’s 2minutes of my life I’ll never get back.
I heard Jack Tane whining about this last night. Please spare me.
Once you have paid tax on your wages you should be free to invest in whatever you like or spend all your cash and be poor.
It’s about choices. Some people chose wisely other don’t.
Now how to solve the problem of everyone putting their money into houses.
1. All super contributions should be tax free.
2. All gains in the super should be tax free
3. You pay the nominal rate of tax when you withdraw $ from your superannuation.
Join the rest of the World NZ, that’s how it’s done in all the other countries.
Having had no say in the matter, I was born into a lower socio economic rural rump and with gt gt gt grandfathers both paternal (French} and maternal (Norwegian) who married Maori which has been diluted over the decades by lots of Scottish, English Irish Welsh - but nevertheless, a pedigree which had me penniless when I joined the police at 19 years of age from an environment which lacked the drive it instilled in me.
From that point, in charge of my life and my destiny, in spite of the handicap I was bequeathed, I had the sagacity and latent economic acuity to borrow and buy a house. With wife we lived in it then sold and took the capital gain tax fee and reinvested - an I did this 9 times which combined with hard work police graduating twice university private business parliament private business and paying tax all the way, was able to put my kids through premium private schools while domiciled in Remuera.
That's the benefits available from capital gains no tax.
Introducing a time limit to hold property or pay tax on capital gains is a reasonable handbrake on pure speculators - but NO capital gains tax has been and will be the ladder for all who try.
Unless you’re in the business of buyinh
We pay tax on all other forms of investment made via our NET income, included interest earned in the bank, so why not property portfolios?
Owner/occupier/ family home -absolutely hands off.
Family bach & everything else - yes, but only if you get to claim the interest, R & M, rates, insurance etc along the way. Not even IRD should be able to have their cake & eat it.
MPs understand better than most the attraction to the govt of inflation to solve debt burden, and hence the luke warm efforts to restrict it, and the huge propoganda element in official statements. Mps also grasp the potential fickleness of the money saturated world of shares. So they buy houses.
A case can be made for capital gain on property. But to be fair has to exclude basic inflation, include the family home, be postponeable to not obstruct moves, and not all at the top tax rate. The associated accounting effort is immense and would represents more wasted effort than the te reo industry. At the Covid price peak a relative bought an older home in a reasonably central suburb to suit work in the city. Spent lots renovating. Then, completely out of the blue, and contrary to the well considered Unitary Plan, six and more stories authorised hard alongside. Sale now would represent a capital loss likely in 7 figures, not attractive even if a tax credit at the max rate.
So people should be disqualified from becoming MP's if they have more than one house, or be forced to sell 'excess' property if they are elected or appointed as list MP's?
It seems that the left would far rather NZ represented and guided by people who have never worked in a real job in the real world, never been financially successful or responsible, never invested in the most advantageous investments available at the time...... we can see where that led to, can't we.
Post a Comment