ECO Housing Fund (EHF) Strategy
Company tax breaks received by rental housing property owners are primarily responsible for inflating house prices beyond the reach of the majority of prospective owner-occupiers.More info
- While owner-occupiers must pay mortgage costs from their income after tax, rental housing property owners can claim all their rental business expenses, including mortgage interest, against their company tax liabilities. Many have interest-only mortgages – in effect free loan – which helped further house price rises and the prospect of capital gains if the house was on-sold at a higher price.
- Owners with rental properties registered as a Loss Attributing Qualifying Company (LAQC), now largely replaced by a Look Through Company (LTC), are able to claim any company losses against any other personal income tax liability they may have from income from other sources. This significantly reduced the IRD tax yield from high income earners.
- In addition, market rents are being subsidised, directly by the Accommodation Supplement (AS) paid to low income households, and indirectly by the Working For Families (WFF) tax rebate paid to middle income and some wealthy households.
1. The tax breaks on rental housing companies and on their owner's personal income from other sources be abolished, putting downward pressure on house prices. As house prices fall, the Accommodation Supplement and Working For Families subsidies of market rents will reduce.
A capital gains tax be imposed on the windfall profits from the sale of land for housing development and/or undeveloped land values be capped at the agricultural value of the land.
2. That the EHF seeks an interest-free loan for kick start capital.
- To establish a factory and commence manufacturing eco housing to rent, and to rent/purchase housing land.
- To let the eco housing at rent set at 25% (before tax) of household income.
- To use the initial rental cash flows to finance construction of more eco houses and rent/purchase more land.
- At some point to use some of the increasing rental cash flow to repay the initial kick start loan and become self-financing thereafter.
3. That a Clearing House System is set up to establish fair market prices for the purchase of non-EHF housing stock;
- Banks, rental property owners, and owner occupiers can submit details of houses for sale to the Clearing House website.
- Anyone can bid online the buy the houses or bid to be an EHF rental tenant of any house for sale.
- The EHF can also bid to buy any house, the bid being calculated as a multiple of the highest 25% rental bid for that house eg. 12 x the highest 25% bid for a house would represent a ratio of household income to house price of 1:3, which used to be the historical norm until the mid 2000's.
4. After the manufacture and purchase of sufficient housing by the EHF, to match the number of bids by prospective EHF renters;
- A portion of the snowballing rental cashflow will start to be invested in sustainable businesses providing value-adding jobs.
- At some later stage, if a surplus rental and investment income starts to accumulate, some portion of the surplus will be used to make periodic payments of a dividend to trust rental tenants, from households who have been in paid employment or recognised voluntary work, commencing at age 65. The amount of dividend will reflect the total amount of rent paid by the tennant up to that age.
- The EHF rental cashflow and investment returns will provide a more reliable financial base for the dividend payouts than would pension fund contributions out of taxed, earned income into conventional pension schemes which charge substantial fees and can produce substantial losses.
Compare overview at OECD Economic Surveys New Zealand April 2011
Grant Yourself Three Wishes !
- A comfortable, affordable, eco-home
- rented at 25% of household income
- Better job prospects
- as EHF Fund invests in the economy
- Regular dividend payments on reaching age 65
- in proportion to your total EHF rent paid up to that date
By supporting the EHF strategy.
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Folding home design
Every EHF renter will have more disposable income, as a EHF rent of 25% of household income will be considerably less than a market rent or mortgage payments, and as power bills are minimised in a fully equipped eco-house.
EHF rental households must have at least one person in paid or recognised voluntary work for their rent to qualify for post age 65 dividend payments. Rent at 25% of household income will support tenants transitioning to full time paid employment.
Voluntary contributions to the EHF will be permitted from individuals and households who are not EHF renters, including Kiwis overseas, and they will qualify for periodic dividend payments after age 65 in proportion to the contributions paid.
Everyone in employment will gain from EHF investment in the economy to improve productivity and earnings, while beneficiaries and national superannuitants will gain as index-linked benefits increase. More info
- working professional couples paying market rent, who can't afford a mortgage, or who can't afford both a mortgage and children
- low income single parent households, usually female, struggling to raise children
- middle income, middle aged, re-formed/second family households, who have ongoing financial liabilities to previous partners and children
- 'mum & dad investors', particularly superannuitants who have lost their life savings in finance company failures, who are paying market rents, or who are in freehold homes and struggling to pay rates, power and home maintenance bills
- beneficiaries facing the poverty trap of benefit abatement when they earn income
- high income earners, who will recognise the superior value and stability of the EHF alternative by comparison with more speculative and risky investment strategies
- anybody facing negative equity and a mortgagee sale.