The Government's decision to expedite tax cuts for landlords could result in an additional cost of nearly a billion dollars over the next four years, warns the Council of Trade Unions (CTU). This policy shift is part of the National-ACT coalition agreement, which aims for a phased reinstatement of mortgage interest deductibility for rental properties, set for complete restoration by the 2025/26 fiscal year.
Landlords to Reap Benefits with No Direct Advantage to Tenants
The CTU estimates that this policy will enable landlords to retain an extra $3 billion over four years, a figure that's $900 million higher than the National's pre-election proposal. The tax policy adjustments are planned to be retroactive to April 1, 2023, effectively granting a rebate to landlords without any direct benefit to tenants. Landlords could thus reclaim tax on mortgage interest payments, which are typically factored into rent charges.
Policy Reversal Predicted to Have Minimal Impact on Housing Affordability
The Labour government had previously curbed interest deductibility in 2021, intending to improve housing affordability and support first-time home buyers. However, Inland Revenue had advised against these changes, predicting a negligible effect on housing affordability and potential rent escalations. ACT's fiscal plan suggested that the policy reversal would cost the Government $2.65 billion over four years.
Policy Details Awaiting Finalization
While National leader Christopher Luxon, a multiple property owner himself, did not commit to reducing rents, he claimed the policy would exert downward pressure on rent increases. The specifics of the policy implementation and associated costs are subject to Cabinet consideration and will remain confidential until they are finalized.