“The madness of removing mortgage interest tax deductibility on rental properties is percolating through the nation, with almost 6500 people having signed ACT’s petition to abolish the bright-line test and reinstate the ability for landlords to deduct mortgage interest from their tax bill,” says ACT Housing spokesperson Brooke van Velden.

“It’s becoming clear that people are getting their head around how the interest deductibility change will negatively impact young renters saving for their first home.

The NZ Property Investors’ Federation estimates the cost to landlords who let out a $600,000 house will be an extra $6000 a year.

“Some will sell up, but many landlords will wear the change because it’s so unfair it’s unlikely to last across multiple Governments.

“Those who choose to keep offering rental houses will inevitably pass some or all of that extra cost onto tenants, thereby making it harder for tenants trying to save for a home to build a deposit.

“If the Government goes through with the changes later this year three things will occur:

  1. Landlords will increase rents in direct proportion to the tax effect of lost deductibility
  2. Tenants will put more pressure on the state and non-state welfare system like food banks by applying for accommodation and other benefits to cover the increased rent
  3. The change will have no impact whatsoever on the supply and demand curve for housing

“It was divisive and plain wrong for the Government to describe interest deductibility on rental properties as a loophole.

“Removing deductibility is another income tax plain and simple, but income tax is typically paid on profits, not revenue – as Dr Bryce Wilkinson of the NZ Initiative so eloquently explains in the NZ Herald.

“He asks, ‘If interest deductibility can be wilfully declared a tax loophole, what category of business expense is not a tax loophole?’

“ACT is very clear, the bright-line test was unnecessary and should be repealed because application of the law that existed before it was introduced in 2015 would have seen tax paid on real property speculation.

“We’re just as clear about mortgage interest deductibility. It’s not a loophole and won’t do a thing to improve the lot of first home buyers.”