Housing: State Sacrificing Last Home Buyers to First Home Buyers – This Will Hurt. Say NO.

I know of a retiree couple who lost their home from guaranteeing the business loan of their son. It was a god-awful mess. But on the advent of the expected Reserve Bank change to loan-to-value ratio (LVR) rules, inter-generational stress is set to become a phenomenon of the state’s further intrusion into the voluntary relationships that should be allowed in our economy were it a free one

If we had laissez-faire capitalism we wouldn’t have central banks; they are signposts to the planned economy the West is slowly destroying itself with. But that fact is outside the point of this post. Tightening the LVR rules are about ensuring buyers need more equity, or a bigger deposit to buy their first house, and by this means, so we are told, about trying to bring house prices down for first home buyers. I’m not the first to point out the irony the rules themselves may be responsible for ensuring up to half new-home buyers won’t be able to afford to buy their first home at all. This post is rather about another unintended consequence likely to cause acute hardship, and destroy the bonds that hold families together.

To circumvent the new rules, Westpac already has announced its guarantee scheme called ‘Family Springboard’ which leverages a family member’s savings or home equity to lower a borrower’s LVR. Sounds great, doesn't it?

To all the mums and dads who will be invited to participate in this scheme by their offspring: NO. Do not let your children emotionally blackmail you into the risk of losing your retirement. Because I can also tell you, children, circa 2013, at least eleven out of every ten of them, when it comes to money and your savings, have a tendency to be selfish little shits, with no comprehension around risk, or your welfare. Not really. You are too old to risk your assets on the risk appropriately taken by the young. There will be all sorts of pressure applied on you through this, because your kids want what you waited for now; so if you must, loan them, or gift them, the balance of the deposit they need - they have saved something, right? - your loss is then restricted to that; but under no circumstances allow the banks to take what will no doubt be an unlimited guarantee over your peace of mind and the material result of your lifetime's work. And if you can’t afford the cash to loan your children their deposit, then doubly so, you cannot afford to be guaranteeing them, because if it goes wrong, remember August 2008, remember 1987 - and be warned there’s quite likely a bigger bust coming - then you truly are losing your home, aren’t you.

And when your children, or more likely, when the partners your children are shacked up with - it's often the in-laws where this stuff all goes wrong - moan how could you not help them? How in their year of full adulthood they’ve never let you down? Refer them to this post.

The unintended consequence of this further state intervention in the voluntary transactions of free individuals to protect first time buyers - at least, those few this doesn’t keep out of the market for good - shifts risk to that group whom couldn’t afford to recover from losing their home: last home purchasers about to retire, or whom are retired.

Sheer lunacy.

And talking about sheer lunacy: Labour MP Andrew Little who ‘knows not what he does’. Next time, despite I’m seriously running out of time, and I have Clifford Bay and Tyler Cowan’s great stagnation thesis as it applies to New Zealand farming lined up also …

State Housing – Is There Any Better Example of What Is Wrong With The Welfare State?

I’ve not kept up with National’s intentions for state housing: I’m finding tuning into the activities of government depressing and so am less inclined to do so, opting for nice stuff instead, like drinking wine. Although, of course, it is impossible, ultimately, to stick one’s head in the sand, because the state owns us, I know this when I look at our tax liability for the coming year that I’ve just calculated, on which Mrs H is furious, because it means the prudent curtailing of some of our plans; that is, a word increasingly unknown to the welfare state: restraint. Let me explain.

I realise that all current residents of state housing are to be assessed as to their fitting the requirements for state housing, and all the normal hubbaloo is sounding from those statists who have forgotten that a state house was never supposed to be for life: it was a step up, a temporary helping hand. So faint praise from me on this one. However, as with so much from this government, it appears to me there is a doublespeak involved. Just as Bill English’s constant references to spending constraints in reality mean not having to deal with what is really necessary, spending cuts, and hiding the fact that his every budget has increased the total government dollar spend, so do I see the lie of the state house occupier reassessment. The lie is in the fact the government is embarking on vastly increasing the stock of state houses: not just the number, but the size per house, to four and five bedroom houses; additional bedrooms being renovated onto existing state houses. Free men know that add bedrooms and build bigger state houses, then welfare will surely fill those bedrooms with babies, who in most cases I would hope have love – though certainly not guaranteed – but much less chances in life, than those born of love, affection, and prudence: welfare is doing what it does best – creating a permanent struggling underclass.

This insight into the doublespeak was gleaned by myself from a two minute clip on the TV 1 six o’clock news this last Thursday night, 16 May. It was discussing the need for bigger state houses, and the camera panned to the problem: a mum – a dad was not present or spoken of, but whether this was a solo mum, or not, is beside the point, which is unrestrained irresponsibility and stupidity – ... a mum, who to me looked younger than 20 years old, until the evidence of her five, yes five, children on the couch beside her, tucking into potato chips, led me to believe she must I guess/hope be in her mid-twenties; anyway, mum wasn’t so much explaining the need for a bigger state house due to the brood of five, but, sit tight – something mum should have done much more of – it wasn’t just the five children next to her, as she went onto say, rather the eight, EIGHT, children family she has, and an additional one on the way because mum was pregnant again. Apparently, despite she could not afford her own housing for the existing family of eight, she’d made the decision to have another. Honest; watch this nonsense, though make sure, first, you’ve nothing precious and breakable around you.

Although as bad as that is, and monumental stupidity on this scale is beyond my comprehension, it still was not the bit that really had me angry. On the arm of the chair mum was sitting on, was a Sky TV remote control. Now as regards that remote, here’s an interesting anecdote.

I had two clients last year post their Sky remotes back, because they couldn’t responsibly – big word that – afford their subscriptions. Both clients are self-employed, one in the trades, the other a rural contractor; one with two children, the other with one, and both pay tax; their problem being after paying tax they're struggling. These two families are paying tax so mum of eight – nine to be – can move to a bigger house with her Sky decoder, and she's the one on the telly complaining about her lot, that the politicians from all parties in our Parliament are pandering to.

There is nothing right about that. Nothing at all.

For myself, partly because I keep this site, and I’m rightly terrified of IRD, I prudently do my taxes conservatively, or as best I can with our mish mash mess of complicated tax law, hence Mrs H is not best pleased with our tax bills coming this year – (aside: I see the IRD tracking through my blog (see update 1) and so remind all officers to read my disclaimer at bottom, please, especially in this age when the IRD has broadened its reign of terror to advisors.) Although our problem is a little more complex than that: I’ve had about as much as I can take of social(alist) democracy – read funding mum of eight with ninth on the way - but have resigned myself to the fact this train we’re on to the state gulag is unstoppable, so I want to take more time out to look at the scenery on the way, and do my own ‘thang’. Thus, with only Mrs H and myself to look after any longer, and we can live pretty cheap - our biggest budget item is wine - I’ve been asking some of my bigger clients to leave so I can trade money for time - I've never been driven by money. The way our tax system works this means paying tax bills from higher income years, on smaller income, which is not a problem as we have it put aside, we plan, though is an inconvenience in that I have to look to estimating provisional tax. And within this context we have been spending just a tad too much, for reasons that are personal, and stuck with an earthquake damaged house in Christchurch not helpful, so, as I wrote at the start of this, we’re employing a little necessary restraint, so as not to have to use our long term savings.

And all that would be fine, or rather would have been, if it wasn’t for mum of eight – ninth coming - on Thursday night. Her complete seeming disregard for restraint is just rubbing my nose in how unjust this prison of state known as the welfare state, has become. I’ve said before, the problem is not welfare abuse: it’s welfare use which is, of course, the end of the free society, and the road to a cruel one. And a final note in passing, a personal one, if this is the caring society, then as one of those paying for it at the price of my privacy and right to be left alone, and mine and Mrs H's goals and aspirations, sorry, I ain’t feeling the love, and mum of eight – ninth coming – is feeling, and getting it far too much: has she heard of birth control? If the wine world hadn’t moved to screw tops, I could’ve sent her a cork.

Finally, just for those caring politicians who don’t understand our Western tradition of classical liberalism, no, the ANZAC’s didn’t die for this unrestrained, irresponsible, behaviour politicians use to bind the prudent to the yoke of them, either. Far from it - this is what war hero Charles Upham was fighting for.

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Um, unrelated addendum: I don’t want to depress the workers too much more, but in case you hadn’t noticed, the government money printing presses have been working incessantly, world-wide, to ensure the next economic collapse is much deeper and more thorough than the last one starting – and still going – since August, 2008. The markets are going to collapse again – why, because the fix for that financial crisis implemented by the state planners, was simply much more of what caused it: (just quietly, another reason to hunker down and take stock) … [Lights fade to maniacal laughter).

With that, Mrs H and I are entering the last couple of weeks of our break, with friends descending on us tomorrow and staying for a while, so posting may be intermittent until we get back to Geraldine.