COMMENT: If you’ve ever read any of the works of Shakespeare, you’ll know that he was something of an amateur ornithologist. Over 60 species of bird appear in his various plays, including owls, larks, wrens, cormorants and nightingales.

What isn’t so well known is the story of Eugene Schieffelin, a German immigrant to the US, who (reputedly) wanted to introduce as many of Shakespeare’s birds, as possible, to the US and in 1890 released 60 starlings into New York’s Central Park in the hope that they would start breeding.

They did, and today, the US is home to an estimated 200 million European starlings making them such a pest that they are one of the few bird species in the US unprotected by law. They’re also a particular danger to airports because they flock in very large numbers – a reality which had deadly consequences in 1960 when they flew into the engines of a plane leaving Logan Airport in Boston, causing it to crash and killing 62 people on board.

The story isn’t unique to the US of course. The early British settlers introduced all manner of flora and fauna to New Zealand in the 19th century in an attempt to make our nation “a little piece of England”, but instead, cursed us with an irreversible blight of such delights as gorse, rabbits, and various other wildlife, which have ended up endangering our own native species.

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There’s a name for such actions: the Law of Unintended Consequences. It isn’t just confined to flora and fauna. It’s even more prevalent in politics where governments and authorities frequently enact laws and regulations amid claims of one outcome, but where the “unintended consequence” turns out to be something entirely different as well as, or instead of, the purpose to which the original action was intended.

We can see a practical example of this playing out, right now, in response to the Government’s various initiatives to make property investment less attractive and to scare investors from the market. The naïve theory behind these measures – which include ringfencing of tax losses, removal of the ability to claim interest as a tax deductible expense, punitive changes to tenancy laws, extending the brightline test and taxing capital gains – is that, if investors can be crowded out of the market, first home buyers will buy the homes investors would have bought and the world will be a happier place,

It’s a nonsensical theory which will, instead, do great harm to the rental market.

Here’s why: Despite periodic headlines breathlessly telling us that home ownership rates in New Zealand are plummeting, they are not. In fact, the data actually tells us that our rate of home ownership has remained remarkably consistent for almost 100 years at around 65% of the population, despite house prices broadly doubling in each decade over the past 40 years.

New Zealand houses

Ashley Church: “Our rate of home ownership has remained remarkably consistent for almost 100 years.” Photo / Ted Baghurst

There will be a range of reasons why 35% of Kiwis don’t own their own home. Some will be unable to buy, others will choose to rent, but the consistency of that percentage means we can predict the impact of changes to the market with some degree of accuracy. And here’s the thing – while the percentage is relatively constant, the actual number isn’t because our population is growing. That means that the number of rental homes required to house 35% of 5 million people is fewer than the number of homes required to house, say, 5.5 million people, which is where our population will be in a few years.

Thirty five percent of five million is 1.75 million people renting, and since we know that around 2.86 people live in the average Kiwi home, we can calculate that there must currently be around 612,000 rentals in New Zealand. Around 65,000 of these are owned by Housing New Zealand, 12,000 are owned by Councils around the country, and another 8,000 are owned by Social Housing non-government organisations. The remainder – around 520,000 rental homes – are provided by the private sector.

But here’s the thing – if our population increases to 5.5 million over the next 10 or 15 years we’ll need another 62,000 rentals just to keep pace with that growth. In the past, such growth has been covered by private sector landlords, but if attempts to stop them investing are successful, or worse, if they start selling off rental stock, the Government will need to build as many rentals, in ten years, as they’ve provided in the last 100.

These numbers should go some way toward pointing out the ideological lunacy of the Governments approach to the rental sector and a classic example of the law of unintended consequences in action – because surely nobody would enact such perilous policies on purpose?


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