Comments follow release of draft legislation this week
Earlier this week, the New Zealand government released the draft legislation comprising details of its policy limiting the deductibility of interest costs in residential property investments – and it seems not everyone in the property industry was pleased with the announcement.
Finance Minister Grant Robertson stated that the interest deductibility proposals aim to stem investor demand for existing residential properties without affecting the main family home or new builds.
However, the Property Council of New Zealand warned that the industry cannot tax its way out of the problem.
“For us to be innovative about solutions, the government has to work with the men and women across the industry who are fighting to increase the options for Kiwis in dire need of better housing,” said Property Council chief executive Leonie Freeman.
Freeman claimed that the exemption for new builds might have a promising result. However, it might not incentivise an “extra home to be built for a deserving Kiwi family.”
“Property Council New Zealand has been a passionate advocate for Build-to-Rent in New Zealand as a solution to some of our housing woes, and [the] announcement sadly does little to advance that cause,” Freeman continued. “We are disappointed that the government hasn’t looked to incentivise a truly game-changing asset class, which would see more options for Kiwi renters.”
The NZ Property Investors’ Federation (NZPIF) shared the same sentiment, explaining that tenants of older properties would most likely have to pay for the extra costs put on landlords, and they might find it more challenging to save for their first home.
Read more: Government announces concessions in investor tax rules
ACT New Zealand (ACT) Deputy Leader and Housing spokesperson Brooke van Velden agreed with Grant Robertson’s recent statement that tax is not the solution to the housing crisis, “so why on earth is he piling on a new tax?”
She added: “This is a tax grab rather than a policy to solve the housing crisis. It is intended to line government coffers at the expense of mum and dad investors, most of whom own just one extra property.”
ACT suggested addressing the shortage of urban land by finding new ways to fund and build infrastructure, new coordination between central and local government, new rules for consenting land, and new ways of accessing building materials.
“We have proposed a GST-sharing scheme. We’d remove barriers to finance for build-to-rent schemes, and we’d introduce a Public-Private Partnership Agency – the Nation-Building Agency,” van Velden said.
Meanwhile, National’s Shadow Treasurer Andrew Bayly emphasised the Inland Revenue’s status quo suggestion, pointing out that additional taxes on rental housing is unlikely to be an effective way of boosting overall housing affordability.
“[The Inland Revenue] also claimed the policy would put upward pressure on rents and could reduce the supply of new housing developments in the longer term,” Bayly continued. “It estimates that 250,000 taxpayers will now have to face high compliance and administration costs, further eroding coherence of the tax system.”
