U-turn on property tax ‘unfair to mums, dads’

Powerful commercial forces lobbied the Government to get back tax breaks for tenancies of 10 years and longer but tens of thousands of less influential investors won’t enjoy the same benefits, a sector leader says.

NZ Property Investors Federation president Andrew King was reacting to Housing Minister Megan Woods’ announcement that landlords who owned properties rented for a decade or longer would get the tax advantages back.

King said the Government had bowed to big-business lobbying and changed the rules for the rich, large developer landlords. But “mum and dad” rental owners would not get the same benefits.

“Woods says that build-to-rent would provide high-quality rental housing so these tax benefits are going to benefit high-income-earning tenants rather than the vast majority of tenants,” King said.

“The vast majority of tenants cannot afford and do not want brand new, highend rental accommodation. They want good quality, warm and dry but modest accommodation.”

He said the discriminatory removal of interest costs as a legitimate tax deduction had only seen the cost of many rental properties increase, and that would continue as the taxes rose in the next four years. Tenants had been vocal in expressing how their rents had been rising and there was not a good supply of rentals to meet their needs, he said.

“While many claim that it is landlord greed causing these problems, it is actually Government policies such as removing interest deductibility that are the main problem.”

Allowing mortgage interest deductibility for high-end rentals would not solve the rental crisis that many Kiwi tenants were facing. Interest deductibility should be reinstated for all rental properties, not just high-end ones, he said.

“The vast majority of rental properties . . . are provided by so-called mum and dad owners of one or two rentals. They mostly provide an excellent service to their tenants and new laws mean they must provide a warm, dry rental home for their tenants. They operate with low overheads and low, often negative, margins that actually provide true value for tenants.”

The federation had argued against three tax changes: Removing mortgage interest as a tax deduction; ring-fencing of losses on property; and the bright line test.

Removing those changes would provide some real relief for the majority of tenants, King said.