Tuesday, 19 June 2018

The foreign buyer ban - revisited

Labour's foreign buyer ban is back from select committee.

Recall that I had a few issues with the prior draft:
  • It catches people living in New Zealand on work visas who are not yet resident, but who may intend on becoming resident. For example, a doctor coming in to work in Greymouth on a skilled migrant work visa would be banned from buying a house there until she has achieved residence. An international student graduating from Invercargill's Southern Institute of Technology and moving onto a work visa and into a job there couldn't buy a house. 
  • Permanent residents who split time overseas, or who have to spend some time abroad, can be hit by it. 
  • It would mess up financing of projects like apartment towers where funding can come from foreigners who buy off-the-plans and then rent to locals.
  • It will mess up building larger developments where the developer is considered foreign-owned because more than 25% of their shareholding is foreign. 
  • It sets hurdles before infrastructure companies needing to buy bits of residential land for cell towers, power lines, telecom cables, or water pipes. 
  • It creates confusion where a business includes residential premises for workers and the business is purchased by a foreign outfit. Would they have to tear down the houses?
And, on top of all that, it's hard even to show that there's any kind of problem. The proportion of transactions involving foreign-affiliated buyers is low, and highly variable across the country. 

  • Can the Overseas Investment Office really handle 3000% more applications? Really?
  • Why apply it across the whole country if you're just mad about Auckland?
  • If New Zealand really wants to attract skilled migrants, treating them badly isn't a great way of doing that. 
  • We look like dolts in international trade negotiations.
  • Regulatory uncertainty for investment in residential development is a stupid thing to add in when we already have big problems in getting housing developed. Don't we want the big foreign companies that can build to scale? 
  • What kind of precedent are we setting when we run policy in this shonky a process? And what should we think about a Treasury that figures it's ok to put up an RIS where the problem definition is just "Labour wants to do this; this bill solves that problem." What kind of tinpot policy process are we running here?
Ok. So, what's in the Bill back from committee? 

First up, I Am Not A Lawyer. There's bound to be stuff I'm missing and that lawyers for those directly affected will catch. I am not checking stuff like "In section 62(a), replace "section 17(2)(f)" with "section 16E(4)(f) or 17(2)(f)"." is consequential. In a better world, legislation that needs this much fixing after first reading because it had such poor pre-implementation process would have a sunset clause on it requiring fairly stringent post-implementation review for any renewal. 

First, the good stuff:
  • Anybody on residence-class visas now counts as domestic. When I moved here, it was on a skilled migrant resident visa; I became permanent resident a couple years later. Others coming in on talent visas that aren't resident will still be blocked. So we might expect people to try harder for the residence-class visas. But at least they're counting a broader class of residents as domestic. 
  • There is now a waiver available for those normally resident to buy a house if they're out of country for 183 days in the prior year - the Minister must be satisfied that the person intends to continue to reside in New Zealand. That still seems burdensome, but it's better than it was. 
  • People building apartment towers can some of the apartments off the plans to foreign investors so long as they're then not occupied by those investors. I have no clue what monitoring burden that will involve, or whether any of the appeal of funding an apartment here to be rented out was the option to live in it occasionally. They've also put in a fix for investors in hotel units. [Update: this also applies to buying off-the-plans in larger new housing developments]
  • There are exemptions for network utility operators in telecom, electricity and gas. 
  • Relationship property exemptions would let the surviving non-resident spouse or partner take on the deceased partner's house without having to seek OIA consent.
  • Conveyancing gets easier where the buyer has to attest to meeting the criteria rather than the conveyancer being liable. 
  • Foreign investors in large developments won't be required to on-sell immediately on construction if they intend on renting it out.
  • Residences on a property that are ancillary to the business purpose also have exemption: the buyer of a vineyard that comes with housing for some of the workers won't be hit as a foreign home-buyer.
And the stuff that's still a problem:
  • There remains no adequate explanation of the problem that the ban seeks to solve, nor any reason to expect the policy will improve housing affordability.
  • During the election campaign, Labour wanted to go after foreign speculators, and suggested foreigners would have to build a house here to be able to own it. The increased housing test at Clause 11 still requires eventual on-sale, or non-occupation. Someone coming in on a work visa cannot buy a piece of land and build a house on it to live in.
  • OIO's capacity for taking this on hasn't been addressed, though if the 'benefit to New Zealand' test is now simpler, that could help.
  • There were problems in there for estates where a foreign-based family member takes on the house to be passed on to minor children; I'm not sure what now happens in that case. 
  • I can see political reasons for carving out profits à prendre exemptions for forestry and not for other sectors, but I can't see good reasons for it. The government has made tree-planting a priority, and perhaps sees the exemption as a way of helping them achieve their tree-planting goals. But what of other land-based industries with their own goals?
  • The Opposition statement on the bill points out that retirement villages haven't been given exemptions allowing financing by unit sales to foreign buyers. 
  • Because the legislation was drafted quickly, and amended in response to the first round of criticisms, it seems rather likely that we will find other branches to bash our heads on as we go. 
  • NZIER's critiques remain. 
Update: John Ballingall points me to a bit that isn't in the Bill as reported back from committee, but is in Minister Parker's press release: Australian and Singapore citizens and residents are treated as New Zealand citizens and permanent residents for purposes of the ban. I had known that Australians were exempt from the ban, and had known that they were going to have to do something about Singapore because of the trade deal there. 

I have not seen any additional detail, so do not know whether Singaporean citizens and residents would face the same encumbrances as New Zealand permanent residents, or whether Singaporean citizens would be treated as New Zealand citizens and Singaporean residents would be treated as New Zealand residents. 

But if Singaporean citizens would be treated as New Zealand citizens, then long-standing New Zealand permanent residents would face more encumbrance than Singaporean citizens because of the rules around presence in the prior year. 

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