We know how to fix the housing market, we just need leaders to do it, Shamubeel Eaqub says.

OPINION: The Auckland housing market is booming again.

The policies that have been tried so far come from a long list of possible solutions. Only they seem to have list upside down. The least effective policies are being tried first and with variations that weaken and make them less effective.

I imagine there are many reasons for it.

Rising house prices make home owners wealthier and happier, who tend to vote more. Falling house prices make young people and those looking to buy happier, but they don't vote much.

Politically we want house prices to rise for home owners, but fall for first home buyers. We can't have both.

This is where leadership is needed to set out a path to affordable housing, and putting it back to where it should be: shelter and a human right, not an investment and a reserve for the rich.

The hiatus in soaring house prices from late 2015, when new policies for investors and foreigners were brought in, is over. House prices are soaring not just in Auckland, but also exporting its woes to other parts of New Zealand.

The market is so hot, and people are so desperate to get a slice of it, that there is a new business to allow just that.

According to media reports, The Ownery will buy investors a share in a home for as little as $500. The innovative spirit is very much a part of New Zealand DNA, but it is being directed at how to get a slice of property as an investment, not solutions like building new houses or innovation in policy.

TWO ISSUES

The core of our housing nightmare rests on two big things.

First, housing increasingly an investment, not a home. This is supported by our tax and banking policies – no other investment is taxed at such a low rate and no other investment can borrow as easily and as much.

Second, our inability to build enough homes. It is because our population growth is highly volatile and when it suddenly grows, we can't supply enough land with necessary infrastructure, or build them affordably and efficiently.

We have known these issues for a long time. We also have a pretty good list of the solutions.

But political will is missing and has been for decades. New policies to deal with the housing crisis are brought in only when the public mood turns ugly.

The recent talk of a land tax is a good example. It is not a bad idea, if set at a low level and for all land. But of course there would be exceptions, with musings that it would only apply to non-resident owners.

Suggestions of a house price to income ratio cap is similarly a good idea. But the Finance Minister mused that it would be the responsibility of local government, who have few direct tools to achieve this. It would be far more effective if banking rules were changed to cap the lending relative to incomes and not secured against land.

Again, the idea is good, but ineffective from inception.

TWO PRONG APPROACH

I reckon we have to take a two prong approach. First, deal to speculation. Second, deal to the structural issues.

Dealing to speculation needs tightening our tax rules and banking rules.

Capital gains should be levied on all investment properties, no longer how long they are held. Losses from investment properties should be ring-fenced and not be offset against other income.

Also known as negative gearing, it is known to cost billions in Australia and is a welfare for the rich. Lending should be tied to the income from property, rather than the value of the land. Failing that lending to housing should be treated as risky as any other form of lending.

Dealing to structural issues needs us to contemplate our rules around immigration, land use and infrastructure funding. Net immigration could be capped at some portion of our population, say one per cent.

It would mean we would push down skilled workers and students in the main, but we would have to deal with the consequences. It would play into xenophobic and insular policies for unseemly parts of the political spectrum, but it would work.

THE FIX

The real solutions, as we have known all along, is to increase housing supply.

This needs local councils to have clearly articulated plans and funding arrangements for perhaps a century of expected supply, not six years as is the case in Auckland.

Councils currently are not appropriately funded to deliver the infrastructure, as they bear the cost, but the fiscal benefits of work and income growth accrues to the central government.

Building companies do not take up enough labour and capital, because they are always fearful of big cycles.

A big programme of social housing investment by the government would provide a base of guaranteed work that would smooth out the cycles and lead to a more resilient construction sector and economy.

We know the solutions.

We also know the rough order of their effectiveness.

All we need now is political courage to do the right thing for New Zealand.