Prime Minister Christopher Luxon says renters are "very grateful" the Government is reintroducing interest deductibility for landlords.
Interest deductibility relates to the ability of landlords to claim interest on mortgages as an expense in their tax return. It was removed under the previous Labour-led government.
Associate Finance Minister David Seymour announced the changes on Sunday, which would phase the tax relief for landlords over the next two financial years.
Landlords will be able to claim 80% of their interest expenses from April 1, 2024, and then 100% of those expenses from April 1, 2025.
Luxon was speaking to media after opening a mobile breast screening clinic alongside Health Minister Dr Shane Reti in Auckland today.
He said National had campaigned on reintroducing interest deductibility because it cared about renters.
"What has been utterly unacceptable is 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 brightline test. Those costs have just been passed straight through to renters with higher levels of rent.
"We care about renters."
He said he didn't think there'd been a "backlash" against the policy.
"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.
"That's exactly what has happened, when the last government made that decision, and it was a dumb decision, it wasn't an appropriate decision, it was wrong, we opposed it from the beginning, for that very reason."
He said New Zealand had a "major problem" with the supply of all types of housing, including open market rental and social housing.
"So actually increasing the supply of rental properties by making sure landlords aren't actually removing their properties from the rental market, that they aren't adding those costs of interest deductibility and brightline implications onto the rents, is actually a very good thing."
Luxon said the Government had received advice its policy would have "downward pressure" on rents because costs were lower for individual landlords.
"The previous government loaded up costs on landlords and passed them straight through to rents."
Luxon, who owns rental properties himself, was asked if he intended to lower rents on those properties.
"It's not about me. It's actually about a policy and I don't benefit from this policy."
This morning, on TVNZ's Breakfast programme, Labour leader Chris Hipkins said $900 million a year in tax breaks for "mega landlords" would "result in a handful of landlords becoming millionaires solely from their tax breaks".
On Tuesday, Labour’s Finance spokesperson Barbara Edmonds has said bringing back interest deductibility was a "tax advantage for the wealthy" and "shows where the coalition Government’s priorities are”.
“It’s not lunches in schools, the smokefree generation, or continuing the Cook Strait ferries — it’s mega landlords.
“This is yet another example of the coalition Government making decisions that solely benefit the wealthiest New Zealanders.”
Te Pāti Māori finance spokesperson Rawiri Waititi said the changes were not about lowering rents, but increasing profits.
"The coalition’s plan to reintroduce interest deductibility will flip the housing market in favour of wealthy investors and push first home buyers out of the market," he said.
"We’re issuing a stern warning to landlords – if you take from the taxpayer, expect to pay it back as soon as we take office."
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