Bernard Hickey: Young and poor to pick up cheque for public assets

As home-ownership falls, rates are paid more by owner-occupiers, landlords, farmers and commercial property owners, who tend to be older and richer. Photo / File

It pays to ask questions when plans are afoot to change how community assets are paid for.

This week, Local Government NZ launched a review of how councils raise money, concerned future ratepayers won't be able to pay for infrastructure.

LGNZ suggests payroll taxes, sales taxes, petrol taxes, and congestion and visitor charges. It also suggests that councils use debt to pay for infrastructure with a long lifespan.

As home-ownership falls, rates are paid more by owner-occupiers, landlords, farmers and commercial property owners, who tend to be older and richer. New types of taxes would pull younger and poorer citizens into the net.

Over the next 15 years, the baby boomers will retire and must keep paying rates while living on their pensions and savings.

But the value of their houses rose by $663b to $719b over the past 30 years; the bulk of that capital gain went to home-owners over 45.

The irony is that in the past 30 years, that generation under-invested in public infrastructure. Now, as catch-up spending approaches, they face higher rates and lower incomes.

There is another solution: to increase rates on land values rather than capital improvements, given most capital gains have been in land values.

Baby boomers can afford it. It may mean councils have to take on more debt to pay upfront costs of spending; some asset-rich property owners may have to sell at lower prices to younger first-home buyers; and others may have to take out reverse mortgages.

That would be fairer than shifting the costs of new infrastructure on to younger and poorer tenants, who need all the help they can get.