Prime Minister Christopher Luxon and Health Minister Shane Reti in Manukau at the launch of a mobile breast screening unit. Photo: RNZ / Marika Khabazi
Prime Minister Christopher Luxon has defended reinstating interest deductibility for landlords, saying renters will be grateful costs are not being passed on to them.
From 1 April, landlords will be able to write off 80 percent of their mortgage interest on residential investment properties, and 100 percent from April 2025.
The move was hailed by landlords, who said it would hopefully increase the supply of rental properties.
However, Renters United did not think it would mean a decrease in rents or have an effect on supply, describing it as a "cash handout for landlords".
Luxon said the government had campaigned on it "because we care about renters in New Zealand".
"I'd say to you, I don't think it has been a backlash. I think if you're a renter, you're very grateful for the fact that actually costs that have been passed on to landlords are not being passed on to you.
"What has been utterly unacceptable was that there's been a $170 per week increase in rents under the previous government and they just kept going up and up and up.
"A big reason for why they go up is because landlords have been hit with costs associated with the removal of interest deductibility, and also the extension of the bright line test and those costs have been just passed straight through to renters with higher levels of rent."
The change - which looks set to cost about $800 million more than National promised during the election campaign - also puts pressure on the government's books.
Luxon on Tuesday had refused to say whether the government could attain the budget surplus promised by Finance Minister Nicola Willis during the campaign, which she said at the time would have been about $800m higher than the one offered by Labour.
On Wednesday, he argued National had been opposed to the change since it was brought in.
"It was a dumb decision, it wasn't an appropriate decision, it was wrong, we opposed it from the beginning for that very reason.
"We have a major problem of supply of properties in the rental market, we have a major problem with supply of houses and people who can afford to buy them. We have a major major supply challenge and social housing estate housing in New Zealand."
He said it was wrong to compare the police demand for higher pay, against the government cutting tax paid by landlords.
"You're completely wrong to conflate those two issues. You know, what we're doing on interest deductibility is making sure we lower you know, we we actually put downward pressure on rents for renters.
"$170 per week, you know, that is that is absolutely insane and unsustainable."
Asked if he would decrease the rent at his own properties, he said he would not be benefiting from the change. This is because Luxon has no mortgage on any of his seven properties.
"Our advice is that we're going to get downward pressure on rents, because essentially, the costs are not being passed through to renters."