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PoliticsNovember 9, 2018

Did Phil Twyford just turn KiwiBuild into a property investor’s paradise? The definitive ruling

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Labour is getting crapped on from the left and right after loosening its restrictions on people making capital gains off KiwiBuild houses. Hayden Donnell argues with the only expert he respects on the new rules.

On Wednesday, important political news was emitted from the Newshub. Phil Twyford had changed the rules for people looking to on-sell their KiwiBuild houses. Instead of forfeiting their entire capital gain if they sold within five years, they would have to give up only 30% if they sold within three years.

My first reaction was to convulse in visceral disgust. My second reaction was to wait a few minutes, then convulse again in visceral disgust. My third reaction was to call an economist, who said it was actually fine. At that point, two sides of my brain split and began to engage in a brutal, unending war  – each wrestling for control of my conscience on the KiwiBuild changes.

This is a transcript of their negotiations.

Fearless Truth Seeker Hayden

Fuck this. The whole reason Labour had to come up with KiwiBuild in the first place was because of the market distortions brought about by property speculation. People leveraging their houses to buy more houses, forcing property out of reach for just about anyone without existing equity. Now Labour is essentially saying the houses they built to address the harm caused by property speculation can be used by people to … do more property speculation. Flip the house the day after you buy it and you can keep 70% of any capital gain. Wait three years and you get 100%.

Partisan Hack Hayden

Who made up these names? Matthew Hooton? First of all, you can’t just “flip” your house inside three years – you need the permission of the Kiwibuild Unit –

Fearless Truth Seeker Hayden

Except what’s the penalty for not getting the permission of the KiwiBuild Unit and secretly selling your house anyway? Only 30% of the capital gain, according to Twyford himself. That’s just in the first three years as well. After that it’s a free-for-all. Having to forfeit your entire capital gain inside the first five years was a much more powerful disincentive. But don’t just take my word for that. Take the word of Phil Twyford, in 2016, when he made that Labour’s policy before changing it on the sly.

Partisan Hack Hayden

Why are we putting extra restrictions on people who buy KiwiBuild houses though? Why do they have to be more moral than everyone else? These houses are sold at market rate. People buy them with their own money. They’re not subsidised by the government. The only thing that KiwiBuild does really is provide a type of house the market wasn’t providing: small and affordable rather than huge, tacky, and kitted out for a party where people drink prosecco and talk about how young people are too lazy to work jobs that earn enough money to buy gruel.

Fearless Truth Seeker Hayden

No, the houses aren’t subsidised. They’re sold for what they’re worth. But the truth is, they wouldn’t have been available without the government coming on board and assuring developers they’ll be a worthwhile investment. The least we could hope for out of the government’s flagship scheme to alleviate the housing crisis is that it won’t be used to make the housing crisis worse.

Partisan Hack Hayden

It won’t make the housing crisis worse! Its main purpose is to increase housing supply, particularly at the lower end of the market, and it’s doing that. But also, you’re acting like the people who are buying KiwiBuild houses are all going to become rapacious property investors. They’re not. They’re people like your friend Matt –

Fearless Truth Seeker Hayden

Don’t bring Matt into this –

Partisan Hack Hayden

Matt, who’s below the median income for Auckland, and is taking on a huge amount of debt to buy what will be by definition of the KiwiBuild rules his first and only home, and isn’t likely to then sell up, pay off his 90% mortgage, and use his meagre leftover thousands to become a fully paid up member of the Property Investors Federation.

Fearless Truth Seeker Hayden

Speaking of the Property Investors Federation, they’re “thrilled” with this new policy. Are you really siding with something that makes Andrew King happy? Don’t your allies say something about the nature of your argument?

Partisan Hack Hayden

Not everything in life is about making Andrew King sad. The way to cut down on property speculation isn’t by restricting it to poorer people who scrape together their savings to buy a KiwiBuild house. It’s to introduce measures like a Capital Gains Tax targeting actual rich people. They’re the enemy. Not some poor sap who managed to get a $600,000 house out in Papakura.

Fearless Truth Seeker Hayden

This does show something though: the government could be running a bit short on buyers who can afford KiwiBuild houses. They’ve had to sweeten the deal.

Partisan Hack Hayden

It sure seems that way. Maybe they should be launching a massive state house building programme instead.

Keep going!
Iain Lees-Galloway and Jacinda Ardern in 2018. Photo: Hagen Hopkins/Getty Images
Iain Lees-Galloway and Jacinda Ardern in 2018. Photo: Hagen Hopkins/Getty Images

PoliticsNovember 9, 2018

Is Iain Lees-Galloway about to become the third Ardern minister to get the boot?

Iain Lees-Galloway and Jacinda Ardern in 2018. Photo: Hagen Hopkins/Getty Images
Iain Lees-Galloway and Jacinda Ardern in 2018. Photo: Hagen Hopkins/Getty Images

Jacinda Ardern has so far said Iain Lees-Galloway’s job is not under threat but pressure is growing for her to sack the immigration minister over the controversial decision to allow Karel Sroubek in New Zealand. Former long-serving minister Peter Dunne explains what will determine Lees-Galloway’s fate.

The one constant about the Karel Sroubek case is that every day seems to reveal more uncertainty. But while we are no closer to either a resolution of the case, or even a clear understanding of why Minister Lees-Galloway has acted the way he has, some things are a little clearer.

For a start, Lees-Galloway did not grant Sroubek permanent residence – that happened in 2008 (albeit under a false name), before Lees-Galloway was even in parliament, let alone minister of immigration. We also know, by deduction, that the decision to grant permanent residence must have been considered so straightforward by immigration officials at the time that it did not require reference to the then minister, because officials have now conceded the only minister they have ever discussed the case with is Lees-Galloway, after October 2017. And, somewhere along the way, presumably after Sroubek’s imprisonment in 2016, officials discovered the false identity and reissued the permanent residence in his correct name.

When Sroubek became eligible for release, officials raised the case with Lees-Galloway, seeking his confirmation that the standard deportation provisions should apply. Here is where the situation starts to get murky. It appears – for reasons which are not yet known – that Lees-Galloway declined to confirm Sroubek’s deportation, choosing instead to defer the requirement for five years, thus upholding Sroubek’s permanent residence and allowing him to stay here.

In the wake of the ensuing uproar, and the release of more information about Sroubek’s background that was apparently and curiously not known previously to officials, Lees-Galloway has ordered a reconsideration of the case. But that has only made things more difficult. Lees-Galloway is already under strong public and political pressure to just overturn Sroubek’s permanent residence immediately and send him on his way. That is the one thing he cannot do – for reasons of natural justice in the event of any subsequent push for a judicial review of his decision-making – so Lees-Galloway has to be seen to now have followed due process, which will be time consuming. And while this rolls on, he has to suffer the death of a thousand cuts on almost a daily basis.

This whole saga raises many questions of judgement, most of which come back to Lees-Galloway. While he cannot be held responsible for the original residency decision, which happened long before he became minister, he has to be held responsible for the decision to effectively confirm Sroubek’s residence by deferring the usually automatic deportation decision for up to five years. There have to be serious questions as to his reasons why. Moreover, his failure to offer anything approaching a credible explanation of his actions starts to bring his wider  judgment and suitability to hold ministerial office into question. His subsequent bizarre behaviour (hiding awkwardly behind pillars to avoid journalists and less than stellar defences of his position in the House) raises even more doubts.

No doubt officials will find compelling reasons over the next couple of weeks to enable Lees-Galloway to overturn his decision and Sroubek’s residency. But that will not excuse them for the original decision to grant residence to Sroubek, and not pick up until much later the false identity he was using.

With allegedly improved information sharing between relevant government agencies following the 2014 Smith/Trainor passport fraud case, there should have been no reason for not picking up Sroubek’s real identity much earlier. The discovery that Sroubek used a false identity to gain residence all those years ago was a sufficiently serious matter to have been to the attention of the minister of the day at that time. There needs to be some explanation for this, and steps taken to ensure future ministers are not subject to similar blindsides.

Probably the worst news for Lees-Galloway is that while the prime minister did not seem at first to know too much or even be all that interested in the Sroubek case, she is now engaged and becoming irritated and frustrated by what is being disclosed. He will also be well aware that two ministers have already fallen this year over performance and conduct issues, and will be increasingly concerned not to become the next one to go.

He will have realised that what officials disclose when they eventually report back will determine not only Sroubek’s fate, but also his own.

The latest comments from Lees-Galloway further fuel the fire. The fact that he took about an hour to consider the case is neither here nor there – a hour of a minister’s time on any issue is actually quite long. But what is far more concerning is his admission that he did not read all the file, and by implication appeared not to have had any concerns arising from his cursory consideration to discuss with officials, and also that his officials did not see anything to raise with him once he indicated his likely decision.

From my experience as a former Internal Affairs Minister dealing with passport issues, in similar situations, officials and my own relevant office staff went to extraordinary lengths to ensure I had all the relevant material before deciding on contentious cases. It is hard to believe that immigration does not have similar robust processes in place and therefore irresistible to escape the conclusion that Lees-Galloway was blind to the advice, or sadly, more likely, not up to assessing it properly

Originally published at Dunne Speaks

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