By David Hargreaves
Way back in the dark ages when the referendum on MMP was held, yours truly voted for it in the hope that Government processes and particularly legislation creation would be conducted on a more case-by-case basis with Select Committees gaining greater power.
It’s taken an unbelievably long time for our MPs to really concede that the First Past the Post days of crashing through legislation using a majority of Parliamentary seats are gone and that a more cross-party, conciliatory approach is essential.
Now that for the first time under MMP the country is being led by a party that didn’t get the biggest individual share of the vote we should be really seeing this cross-party approach like never before. And select committees are now real important.
All of which is a slightly long-winded way of arriving at a conclusion that there’s good news and bad news from what emerged this week out of the Finance and Expenditure Committee regarding the foreign buyers housing ban.
Let’s start with the good news.
The committee’s obviously thought deeply about the bill and has come back with a pretty considered report that covers a lot of the concerns that were expressed at the time the bill was introduced to Parliament.
I would stress again that I’ve long been in favour of a ban on offshore-based non-Kiwis buying existing housing stock. But I too had a few concerns about this bill, including the requirement that foreign buyers would have to sell houses they had built and also the onerous requirements that were put on those doing conveyancing.
The select committee’s tried to reach a happy middle ground on those concerns.
On the question of offshore investment in new apartment complexes, I don’t think we can be cavalier about turning away foreign capital if the social cost of that action is that we don’t then get much needed housing stock built.
Sure, if we were confident as a nation in our ability to self-fund all such activity, then why not? Historically though we’ve tended to struggle to access large-scale capital. We have a reputation historically as rubbish savers (it is changing). And we’ve had shallow pools of available capital. Witness the increasing number of companies for example no longer bothering with the New Zealand sharemarket and going straight to the bigger funds pool available across the ditch in Australia.
Obviously not everyone will be happy with this perceived ‘softening’ of the bill. The flip side is that those such as the retirement village operators, who might have substantial percentages of their shares owned offshore, didn’t get an exemption – which looks contradictory. ‘He got one – why can’t I?’ But look, nobody’s ever happy with change to the status quo. Then after a while everybody usually forgets what they were complaining about and gets on with the new rules in the game.
I just hope that the comprehensive changes that have been made to this bill have now got us towards a workable piece of legislation that will do a job.
I say that because while National’s opposing the bill right now, just you wait, there’s no way they would reverse it when next they are in Government – because it wouldn’t go down well with the electorate.
So, since the law is likely to be around for a while, we need it to work as intended, without any unintended consequences.
As ANZ economists noted this week, while they don’t see the new rule having much impact right now, it might in future – and they can’t rule out the possibility it might have had more impact if it had been put in place earlier in this housing cycle. So, I say it needs to work ‘properly’, without unpleasant surprises.
It needs to work because our housing market is too small to be left to the whims of the vast offshore investment pool. We could be priced out of our own country. Some might argue we already have been.
There’s no doubt also that some potential overseas buyers see New Zealand as a kind of ‘Armageddon Option’ in very uncertain times globally, given our geographic distance from, well, everything. This is a trend/pattern that’s only likely to increase.
Therefore we need this bill to be strong and to stand up to scrutiny and legal tests. A law isn’t really a law until it has become part of a court case and then the real effectiveness of it is decided by how a judge interprets it.
Which comes back to the importance of getting the drafting right. It’s fine for the Government to decide that ‘this is a bill that bans foreign buyers’ – but is that necessarily what the bill says and therefore how it will be interpreted in the courts? We shouldn’t just applaud the sentiment and what’s intended. We’ve got to make sure the law is fit for purpose – that it does what it says on the tin. I don’t think this one did in its original form.
The bad news
And that leads me to the bad news part of the equation.
I do recommend that those keen on the ins and outs of this legislation have a good look at the version that’s come back from select committee.
To me, it kind of looks like one of my assignments used to look at school when coming back from teacher.
Yes, just a few changes made there by the committee. The red biro has been out. I think you can almost make out the original bill underneath all the changes.
This suggests that National with all its opposition MPs and therefore strong representation on the select committee has been active in seekng change. So, that’s the positive impact of MMP that certainly I’m looking for.
It’s also positive that the select committee has resurrected this bill to the point where it now hopefully can go on to be a useful and workable law.
On the other hand though it seems regardless of what the opposition was saying, Labour itself has presumably also realised it over-egged things in certain areas and didn’t consider all the ramifications.,
And that’s bad.
It’s not bad that Labour’s seen it made mistakes.
Didn’t think everything through
It’s a definite negative, however, that Labour clearly didn’t think through everything before it put this bill before Parliament – and didn’t take the time to gather all the evidence and advice it needed.
The foreign buyer ban was one of Labour’s first-hundred-days promises and it put this bill up in a tearing binary options game .
Now, poorly drafted, ill-considered legislation – is that an unfair criticism, you might ask?
Well, surely the proof is in the number of changes that have been made by the select copy trading binary options committee. If something’s been done correctly the first time you don’t then carve into and do it all again. You refine it. Like a piece of art.
If, however, it’s a rip, shit and bust job then it invariably needs redoing. The dreaded scrap and rework. Ambulance at bottom of cliff. Etc, etc.
Remember, the original time for passage of this bill was pushed out when it was realised (to their credit) by the Government that more time would be needed to fix it. So, it would not be right to say, as some might, that time was somehow saved by putting up an inadequate piece of legislation first social trade and then getting select committee to fix it. Bad legislation shouldn’t be promoted and supported just because the sentiment of it is ‘right’. Do your homework and get it right first.
So, as indicated further up in this article, I’m all in favour of select committees having a bigger role in Government and the shaping of legislation. But its risky to start putting really ill-considered, hasty, legislation in front of the committees. It’s better to do something right first time than to be trying to correct something later. We want the select committees to be honing good legislation; fine tuning it. We don’t want them to be patching up wrecks.
The upshot is, I’m concerned (and half suspect) we may yet find some major flaw in this legislation – even after all the fixes that have been applied. Look, I hope not.
And in the assumption/hope that all does go well, I hope that Labour might take a bit of a lesson on board here and won’t repeat what it did with this bill. This Government has shown some tendency to put ideas ahead of process – witness the oil and gas exploration ban.
It’s more important that we have laws that do what they are intended to do (and don’t have unintended consequences) than it is to get laws passed in a tearing hurry to meet some urgent ideological deadline. Legislate in haste, repent at leisure.