Housing is the most politically sensitive long-chain test. The policy question is not only whether build costs rise under the 20/7 architecture, but whether household cash flow improves once mortgage servicing is compared with the removal of PAYE.
1. Tier assignment for a representative build
The example below applies the same classification logic as the cascading note: strict physical absorption for tier 2, narrow essential-chain carve-out for tier 1E, and 65% default recovery for all remaining business inputs.
| Build line item (ex GST) | Tier | Recovery treatment |
| Structural timber, concrete, rebar, shell roofing, core cladding, core glazing, insulation, plasterboard | Tier 2 | 100% GST recovery (0% wedge on that leg) |
| Essential compliance/certification and critical logistics moves | Tier 1E | 85% GST recovery (3% wedge) |
| Labour, site management, services, software, insurance, finishes, general overhead | Tier 1 | 65% GST recovery (7% wedge) |
Representative ex-GST build stack used in this note: $258,000, split as approximately $131,000 tier 2, $14,000 tier 1E, and $113,000 tier 1.
2. Build-cost effect under refined tiering
Business wedge dollars in this stack are:
- Tier 2: $131,000 at 0% wedge = $0
- Tier 1E: $14,000 at 3% wedge = $420
- Tier 1: $113,000 at 7% wedge = $7,910
Total business wedge before final consumer GST is therefore $8,330 (about 3.23% of the build base). Applying 20% consumer GST gives a refined 20/7 build outturn of $319,596 versus $296,700 under a simple current-style 15% benchmark on the same base.
3. Auckland purchase-price translation: why build-only math matters
Applying build-chain uplift to the full house price can overstate effects in markets where land is a large share. A more realistic framing is: land + build, where mainly the build component carries the direct chain wedge.
| Scenario (current price $1,000,000) | Assumed build share | Implied new price (refined 20/7) | Total uplift |
| Lower build share | 45% build / 55% land | $1,034,740 | +3.47% |
| Mid case | 50% build / 50% land | $1,038,600 | +3.86% |
| Higher build share | 60% build / 40% land | $1,046,320 | +4.63% |
4. Mortgage impact over 20 years (illustrative)
Using a 20-year term and 6% interest, the extra weekly mortgage load on the $1,000,000 base case is:
- 45% build share case: about +$57/week
- 50% build share case: about +$64/week
- 60% build share case: about +$77/week
If one (less realistically) applies the full build-chain uplift to the entire $1,000,000 purchase, the extra load is about +$128/week at 6% over 20 years.
5. Zero income tax offset: the core affordability argument
Under 0% personal income tax, illustrative weekly PAYE savings are materially larger than the mortgage increments above for many working households:
| Gross annual income | Illustrative PAYE saved annually | Weekly gain |
| $100,000 | $22,878 | ~$440/week |
| $140,000 | $36,078 | ~$694/week |
| $180,000 | $49,278 | ~$948/week |
This does not remove distributional risk for every household, but it explains the model’s central claim: affordability should be judged on net weekly cash flow, not sticker price alone.
6. Policy reading of the housing case
- Keep 7% as the default anchor: it remains close to the fiscal-neutral centerline in prior series arithmetic.
- Protect true absorbed shell inputs in tier 2: this is the largest anti-cascade lever for housing.
- Use tier 1E sparingly: reserve it for certified essential non-absorbed links where social pass-through is acute.
- Report household outcomes in weekly terms: mortgage delta vs PAYE gain is clearer than gross price narratives.