What will change for landlords under National-led government

Tuesday, 17 October 2023

Phillip Westwood says Labour's housing policy changes have caused him to stopped buying residential property unless they are useful for Airbnb.

Tax relief is on the cards for landlords under a National-led government, but an end to “vilification and abuse” is one landlord’s biggest hope.

National and ACT campaigned on claims the Government’s “war” on landlords had led to higher rents and too much red tape, and was exacerbating the rental property shortage.

Those claims were based on the raft of changes Labour introduced to rebalance the housing market towards first home buyers and better protect tenants.

They included the removal of the ability to deduct mortgage interest on rental properties from taxes, and the extension of the bright line test, which taxes profits from the sale of an investment property, to 10 years.

Tenancy law was overhauled, and the ability to issue 90-day “no-cause” termination notices was banned, and the healthy homes standards were introduced.

National and ACT have more landlord-friendly policies than Labour, and have promised to restore interest deductibility.

NZ First, who might play a role in the new government, also wanted to restore interest deductibility.

While National would return the bright line test to two years, ACT has said it would get rid of the test entirely. Both parties would reinstate “no cause” terminations.

National and ACT have promised tax relief for landlords.

Property Investors Federation vice-president Peter Lewis said his biggest hope was that landlords would no longer be vilified, abused and blamed for most problems in society.

On a practical level, restoring interest deductibility meant fewer landlords would sell up, or take their properties out of the long-term rental market, which would ease the rental shortage, he said.

“Reinstating 90-day notices will make landlords more willing to take a chance on a tenant with a less than perfect track record.

Lewis said it did not make financial sense to remove tenants if it was not necessary, and in his 30-year stint as a landlord he had only ever given two 90-day notices.

“But they are useful to have in the tool kit, just in case you do get a tenant who is a bad egg.”

IFindProperty co-owner, and full-time property investor, Nick Gentle said the return of interest deductibility was “huge”, and would avert a crunch as the numbers on rentals would now work for more landlords.

The extension of the bright line test led investors to hang on to properties for longer than they otherwise would, he said.

“Cutting it back to two years means more will put their properties up for sale, which will be good for the market.”

There needs to be a better way to ensure tenants have security of tenure, property investor Nick Gentle says.

Removing landlords’ ability to give 90-day notices had been damaging for tenants, but was introduced to address a problem around security of tenure, he said.

“We don’t want to just go back to the problem, so we need to find a better way to deal with it, and introduce something that gives tenants more security, while protecting owners in bad situations.”

Genuine consultation was necessary for that, and he hoped the new government would not treat informed opposition to proposals with disdain.

Property accountant Anthony Appleton-Tattersall said the tax changes would not end the existing high interest rate pain for landlords.

“But they are going to bring the way residential property is taxed closer to how everything else is, and they will allow some investors to exit the market without huge tax bills.”

It was worth noting that National and ACT had different plans for restoring interest deductibility, he said.

Under National's proposed changes, the phase-out paused at 50% for another year, rose to 75% in April 2025, and 100% from April 2026, while ACT would restore it back to 100% from April 2024.

It was unclear what would happen to properties bought after March 2021 which had debt that was 0% deductible, he said.

Legislation would be required to make the proposed changes, but the changes could be announced right away with a date they would take effect from, and people could then act on that expectation, he said.