Election 2023: National's tax relief for landlords 'an obscene policy' - tenants' advocate

National's tax relief policy would have been better if it had been directed at encouraging potential property investors to build new homes, Renters United says.

Under the party's housing policy, interest deductibility for rental properties will be fully restored by 2026.

Analysis by Labour suggests landlords would receive an average of $6000 a year in tax cuts, a number CoreLogic senior research analyst Kelvin Davidson says seems accurate.

Council of Trade Union (CTU) analysis has found that in 2021, data showed there were 346 landlords who owned at least 200 properties each. The CTU analysis shows those landlords are in for an average tax cut of $1.3 million each over five years.

The Property Investors Federation says rental property owners are facing financial difficulties and need a tax break.

However, Renters United spokesperson Geordie Rogers disagreed, saying more money for landlords was unlikely to provide tenants with lower rents. He told Morning Report analysis by Treasury on how rents were set showed it was not based on the costs of providing a rental home but on how many properties were available.

"A great example of that is when interest rates were really low, we didn't see those savings being passed on to renters, so it's equally likely that when we give these hundreds of millions of dollars worth of tax cuts back to landlords, renters will not see the benefit of that."

Policies such as National's were aimed at investors buying existing properties. It would have been better if the party had directed the tax incentive at encouraging potential landlords to build new homes, Rogers said.

"Continuing to invest in a housing crisis and not passing those savings on to renters or the one-third of New Zealanders who actually rent really is an obscene policy that is only going to make it more difficult to have a productive economy in New Zealand."

Rogers said while the tax cuts might mean there would be less pressure on raising rents, landlords would still be looking to extract the maximum amount of cash because the supply was constrained.

It would be a poor business decision otherwise, he said.

"We will continue to see landlords extracting as much money as possible and it will be at the cost, as the CTU [Council of Trade Unions] pointed out, of people, for example, on the disability benefit."

National's policy welcomed

Property Investors Federation president Sue Harrison said landlords would not be receiving tax cuts, but the move would restore "tax deductibility which is a normal business way of operating".

It was a cost factor that was never discussed with property owners, including the 94 percent of landlords who only own one of two properties, Harrison said.

She claimed the way the figures were being portrayed was inaccurate and 85 percent of rental properties were in private hands.

She had not done the research but she said it would be "a massive relief" for landlords if they did receive about $6000 annually.

"It would make a huge difference to the marketplace if that actually happened."

Like all homeowners, landlords were faced with rising tax bills, mortgage rates and insurance.

Asked if they got tax relief would landlords reduce rents, she responded it would be about "catching up" on things like maintenance or renovations of their properties.

She believed National's incentives would encourage more people to buy properties to be used as rentals.

More rentals possible

CoreLogic's Davidson said the change would reduce the cost of keeping a property, however, other factors were at play in setting rents, including wage increases and supply and demand (which was going up in the face of an influx of migrants).

"There's lots of complex factors; I'm not sure rents will fall but also I think what we will see from this is rents rise more slowly than what they otherwise might have done."

He believed it would increase the supply of rentals.

Recently, CoreLogic figures showed mortgaged property investors had been buying a lot fewer properties than previously.

"They've had lots of headwinds, lots of challenges in terms of that purchasing activity so they have been quieter ... if the tax system changed, then the incentives to purchase rental properties will just get that little bit stronger and some will come back in, bring a bit more supply into the market and help perhaps control those rental increases a bit more so that will play into the hands of rents."

He did not foresee a flood of new investors, because there were still challenges such as high mortgage rates and low rental yields, however, a bit more supply would take some heat out of the market where rents were starting to rise again.

With high mortgage rates currently, landlords potentially would stand to gain higher returns and that would mean the new government would be faced with a shortfall in revenue.