I spoke with economist and Motu researcher Arthur Grimes yesterday about a paper he has just published today with Amelia Blamey and Norman Gemmell about the effects of monetary policy on wellbeing and inequality.

The paper attached below and linked above and below is titled: Impacts of macroeconomic policies on objective and subjective wellbeing: The role of housing tenure and concludes:

“Using survey data from 84,732 representative households collected by StatsNZ, we find that, relative to outright owners, higher property prices are associated with a decline in NHE for each of private renters, public renters and mortgaged homeowners. In addition, relative to homeowners, renters report significantly lower life satisfaction as house prices rise, with heterogeneous effects depending on age, income and local house price: rent ratios. Our results indicate that macroeconomic policies, operating through the property market, can exacerbate wellbeing inequalities associated with housing tenure.” Motu paper

We discussed:

* how monetary policy has driven up housing prices in New Zealand;

* the implications for renters vs owners;

* how homeowners benefit from rising property prices, but their life satisfaction does not improve;

* how renters experience a decline in well-being as property prices rise;

* The lack of a capital gains tax distorts the housing market in New Zealand;

* Political dynamics favor homeowners, complicating housing policy reform;

* There is potential for reducing house prices through policy changes;

* The current housing market is heavily influenced by macroeconomic policies;

* Supply constraints have worsened housing affordability issues; and,

* there’s a need for tax reform such as a capital gains tax to address housing affordability.

This chart tells the story of housing costs for renters both in private rentals and state homes, homeowners with debt and homeowners without debt.

Chapters

00:00 Introduction to Housing Economics and Well-being

02:54 The Impact of Macroeconomic Policies on Property Prices

06:00 Winners and Losers in the Housing Market

08:52 The Political Economy of Housing in New Zealand

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Ka kite ano

Bernard

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