Taranaki Property Investors' Association

taranaki@nzpif.org.nz

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12-08-2022

Selective reversal of mortgage interest deductibility does not benefit the majority of tenants

The vast majority of tenants cannot afford brand-new, high-end rental accommodation. They want well maintained, warm, dry but ultimately good value rental accommodation. Unfortunately, the discriminatory removal of interest costs as a legitimate tax deduction has seen the cost of many rental properties increase and will continue to increase as the taxes are increased over the next four years for the majority of rental properties.

What we now see with today’s selective reversal of their mortgage interest deductibility tax increase is that the Government has bowed to big business lobbying and changed the rules for large developers turned landlords. Minister Woods says that build-to-rent developers provide high quality rental housing so these tax benefits announced today are going to benefit high income earning tenants rather than the vast majority of tenants as a consequence.

Many tenants have been vocal in expressing how their rental prices have been increasing and that they don't have a good supply of the kind of rental accommodation that meets their needs. While many claim that it is landlord greed causing these problems, these price increases are mostly a result of Government policies, such as removing interest deductibility.

Tenant groups have said that there is a rental crisis, but allowing mortgage interest deductibility for high end rentals will not solve anything for the majority of kiwi tenants. Interest deductibility should be reversed for all rental properties, not just high-end build to rent ones.

The vast majority of rental properties in NZ are provided by ordinary kiwis who own one or two rentals. They mostly provide an excellent service to their tenants and new laws mean they must provide a warm dry rental homes. These private landlords operate with low overheads and low (often negative) margins that actually provide true value for tenants. These are the rental providers that should be supported, not large corporate developers.

In our plan to fix the rental crisis, the NZ Property Investors Federation (NZPIF) has suggested that removing the three tax increases of disallowing mortgage interest as a tax deduction, ringfencing and the brightline test would actually provide some real relief for the majority of tenants. We also suggest introducing a security of tenure model based on the German system  and this would provide long term security for the majority of tenants, not just for high-income tenants who are likely to benefit from this latest announcement.

Tags: media release

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