PHOTO: Chris Hipkins. FILE
Labour’s Capital Gains Tax Plan: A Risky Move Masquerading as a Solution
Why taxing Kiwi dreams won’t fix the housing crisis
🧨 A New Tax — Old Thinking
Labour has unveiled its latest shiny “fix” for New Zealand’s housing affordability: a Capital Gains Tax on property sales.
It’s pitched as the golden key that will unlock housing supply, make prices fairer, and fill government coffers with revenue so abundant it might flow like Waikato River after a rainstorm.
Except… that’s not how reality works.
❌ What a Capital Gains Tax Actually Does
Here’s the inconvenient truth:
| Promised Benefit | What Actually Happens |
|---|---|
| Improve affordability | Landlords increase rents to offset tax |
| Boost housing supply | Investors exit the market, supply shrinks |
| Make it fairer | Everyday Kiwi mums and dads get stung |
| Target speculators | Long-term owners and retirees get caught in the net |
A CGT doesn’t create a single home.
It simply takes money from those who provide the homes.
🧩 The Root Problem Isn’t Tax
New Zealand’s housing shortage comes from:
✔ Costly, slow consenting
✔ Land locked behind zoning rules
✔ Construction delays and labour shortages
✔ Infrastructure that can’t keep up
✔ Decades of underbuilding
Taxing the symptom doesn’t heal the cause.
It’s like treating a broken leg with a parking ticket.
💸 Higher Rents Incoming
Landlords are not mythical ATM machines lurking in Remuera. They’re:
• Teachers investing for retirement
• Tradies building wealth beyond wages
• Families renting out an old home to buy a new one
When costs rise, rents follow.
And renters are already paying top dollar in:
• Auckland
• Wellington
• Tauranga
• Queenstown
Adding CGT is like throwing petrol on an already expensive barbecue.
🧓 Retirees Hit the Hardest
Many Kiwis rely on investment property as their retirement plan.
Capital Gains Tax means:
• Less equity
• Delayed retirement
• Reduced intergenerational wealth transfer
A policy pitched as fairness ends up punishing responsibility.
🏗️ Developers Will Slow Down
Developers fund new homes by selling the last ones.
Tax their gains and:
• Feasibility drops
• Fewer projects proceed
• New supply evaporates
Imagine telling builders:
“Please fix the housing crisis… but we’ll fine you if you succeed.”
🌍 International Lessons: Results May Vary… but Mostly Fail
Countries with CGT still suffer:
• Housing unaffordability
• Supply shortages
• Investor exodus
Examples include Australia, UK, Canada.
Spoiler alert: it didn’t fix anything there either.
🥁 What Would Actually Help?
Instead of taxing ambition:
🏘️ Fast-track consents
🛣️ Invest in infrastructure
📉 Reduce compliance drag
🏗️ Incentivise new builds not punish them
🚫 Cut red tape strangling development
Build more homes.
Don’t tax the ones we already have.
🔮 Outlook: Policy Misfire Incoming
Labour’s CGT proposal is being sold as a fairness revolution. In reality, it risks:
• Higher rents
• Lower supply
• Weaker retirement security
• Slower economic growth
The real winners?
Bureaucracy and paperwork.
The losers?
Everyday New Zealanders.
🎯 The Takeaway
A Capital Gains Tax sounds like a bold idea.
But bold doesn’t equal smart.
New Zealand doesn’t need another tax.
It needs a construction boom.
Homes, not hurdles.