File photo. Photo: Tom Rumble / Unsplash
The Property Investors Federation says the government's move to restore tax deductions for interest on residential investment properties will improve the rental market.
President Sue Harrison told Morning Report the change would increase the supply of rental properties by the "mum and dad" investors she represents.
Tax deductions will improve rental market - property investors
"They're at the coal face. They're working with people in the small towns and the big towns and they're trying to provide properties - 85 percent of property is in private hands in New Zealand so it's a public-private partnership and there has to be balance in that relationship to make it work at all levels, whether it's suppliers, developers, builders, or the people who own the property [and]... we need to make it work for the renters."
The tax break was a "normal business expense", Harrison said.
"It's good tax practice and [its removal] was brought in by stealth through the last government... but the restriction in supply has gone the other way for renters because, inevitably, everything ends up down at the bottom.
"The person who's [supplying] that property is trying to survive themselves so the costs have to come from somewhere."
She said the change to tax deductibility would hopefully increase the supply of rental properties.
"We have people trying to do the numbers on their retirement and working backwards, and thinking if we supply a property into the rental market these are the numbers.
"But suddenly interest rates have increased on them and there's a new tax that wasn't even in the budget when they began, so they're trying to survive with that."
Housing stock is a 'national embarrassment' - Renters United
Earlier on the show, Revenue Minister Simon Watts said the tax reversal would be a "win-win" situation for investors and renters alike.
However, an advocate for tenants does not believe anything will change for them once the tax breaks return.
Renters United spokesman Luke Somervell told Morning Report the savings would not be passed on to renters, and would be a "cash handout for landlords".
Government leaving renters in the cold - Renters United
"Rents are high because we don't have enough houses, and there are enough desperate people, unfortunately, who will pay for them. I'm one of those desperate people, in fact."
He doubted it would impact on supply.
"It's just going to be a cash handout for landlords who rent the same old homes at a greater profit every year."
Somervell disputed statements by the Revenue Minister that it would reduce rents as there was no incentive for landlords to do so.
"They are making record profits, rents keep going up, more people are looking for homes so I don't really see why there is any incentive for them to do that."
The new policy was designed to insulate the market from risk and encourage the "feeding frenzy" of property speculation, he said.
"It's just going to prop up the status quo that's given us the housing crisis in the first place."
He called for more new homes to be built - whether they were rented out or bought by first-home buyers.
"We've got a decaying housing stock that's a national embarrassment and we need to have meaningful enforcement through the Tenancy Tribunal... of Healthy Homes specifications.
"The government is saying that they're trying to help out renters - but then they've got no-cause evictions that are going to boot renters out of their homes.
"I think the minister should come clean and admit that there's nothing here for renters and stop trying to pull the wool over our eyes."