Flat wrong Bryce. I think financial illiteracy is showing a bit with the press gallery on this one.
"I put forward the case that although MPs from outside the Wellington region should have access to state-funded accommodation, they shouldn’t be allowed to profit personally by renting their own houses and sending the bill to the taxpayer. It creates a situation in which MPs receive taxpayer assistance to purchase additional dwellings, from which they then get capital gains, which most people wouldn’t consider part of their job.
I suggested that politicians should only be able to claim the allowance for accommodation provided by third parties, i.e., they shouldn’t claim an allowance to live in their own properties. This wouldn’t save taxpayers money but would remove the pecuniary interest that currently complicates the issue."
See this isn't what is actually happening. You need to ask yourself what the counterfactual would be.
Let's suppose the MPs were only able to claim an accomodation allowance if they rented a property, and nothing else changed.
Ok well:
1) they have the same net wealth as before, so can access capital to purchase property just like before,
2) they have the same income as before as the system provides the same allowance to rented properties or owner-occupied.
So now you have a situation where the MP rents a dwelling in Wellington, and then either owns a house that's rented to someone else in Wellington, or owns a property elsewhere, being rented to someone else instead of owning a property in Wellington that they also live in.
The outcome is the same, the MP owns a house and has somewhere to live. You are simply forcing them to rent that home to someone else instead, while renting from someone else. It's just a money-go-round.
The reason our current system allows them to cover their costs whether owner-occupied or renting is in recognition of the opportunity cost of capital created by purchasing a property in Wellington to live, rather than else where.
To be honest, I've been quite disappointed by the press on this one, I haven't seen a single mention of why the rules might be the way they are (the above description). All I've seen is gutter journalism laser focused on exposing optics that look poor without context.
Hmm or perhaps those MPs would not have bought those rental investment properties in Wellington in the first place if they had not been assured of a guaranteed return when they rented them to themselves.
Possibly. Though they could just rent them to each other. If you change the rules so only rental is possible to be claimed, then Luxon will rent from Hipkins rather than both owning their own.
Given that risk-adjusted returns for residential real estate in general have outperformed all other asset classes in NZ over the last 30 years however, I find it quite hard to suggest anything other than 'other residential real estate' as the most likely alternative investment to an owner-occupied dwelling for these guys if this allowance was modified.
Flat wrong Bryce. I think financial illiteracy is showing a bit with the press gallery on this one.
"I put forward the case that although MPs from outside the Wellington region should have access to state-funded accommodation, they shouldn’t be allowed to profit personally by renting their own houses and sending the bill to the taxpayer. It creates a situation in which MPs receive taxpayer assistance to purchase additional dwellings, from which they then get capital gains, which most people wouldn’t consider part of their job.
I suggested that politicians should only be able to claim the allowance for accommodation provided by third parties, i.e., they shouldn’t claim an allowance to live in their own properties. This wouldn’t save taxpayers money but would remove the pecuniary interest that currently complicates the issue."
See this isn't what is actually happening. You need to ask yourself what the counterfactual would be.
Let's suppose the MPs were only able to claim an accomodation allowance if they rented a property, and nothing else changed.
Ok well:
1) they have the same net wealth as before, so can access capital to purchase property just like before,
2) they have the same income as before as the system provides the same allowance to rented properties or owner-occupied.
So now you have a situation where the MP rents a dwelling in Wellington, and then either owns a house that's rented to someone else in Wellington, or owns a property elsewhere, being rented to someone else instead of owning a property in Wellington that they also live in.
The outcome is the same, the MP owns a house and has somewhere to live. You are simply forcing them to rent that home to someone else instead, while renting from someone else. It's just a money-go-round.
The reason our current system allows them to cover their costs whether owner-occupied or renting is in recognition of the opportunity cost of capital created by purchasing a property in Wellington to live, rather than else where.
To be honest, I've been quite disappointed by the press on this one, I haven't seen a single mention of why the rules might be the way they are (the above description). All I've seen is gutter journalism laser focused on exposing optics that look poor without context.
Hmm or perhaps those MPs would not have bought those rental investment properties in Wellington in the first place if they had not been assured of a guaranteed return when they rented them to themselves.
Possibly. Though they could just rent them to each other. If you change the rules so only rental is possible to be claimed, then Luxon will rent from Hipkins rather than both owning their own.
Given that risk-adjusted returns for residential real estate in general have outperformed all other asset classes in NZ over the last 30 years however, I find it quite hard to suggest anything other than 'other residential real estate' as the most likely alternative investment to an owner-occupied dwelling for these guys if this allowance was modified.