Property investors have warned they'll quit the market if Labour gets rid of negative gearing - but Andrew Little says that's exactly what he wants.
At the weekend Labour announced it would eliminate what it calls a tax loophole - letting investors take rental losses off their total income for tax purposes, whilst still making a profit on the capital gain.
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Speaking to The AM Show on Monday, Andrew King - president of the NZ Property Investors Federation - said it would drive up rents $80 a week, and dry up the supply of rentals as owners bailed out of the property market.
"Right now with the tax deduction and the investor putting in around about $50,000 deposit and using $150,000 equity in their own home, it costs around $6000 a year to provide... a rental property.
"If Labour's policy goes through, that increases to just over $10,000. This is a significant cost increase."
And if rents can't go up that much because tenants won't pay it, then investors will sell up. But that's what Labour wants.
"We want more people owning their homes, not building up huge portfolios of rental properties they get a tax break for, while the poor first-home buyer, the poor struggling couple in Auckland trying to get their first home don't get a look-in," said Mr Little.
"That's got to change."
The catch is, according to Mr King, that it won't be big-time property speculators driven out - it'll be "mum and dad" investors, because speculators already pay tax and won't be affected by the elimination of negative gearing.
"The idea there's these big fat cats going around spending all their money on rental properties and owning vast amounts of rental properties is just rubbish," said Mr King.
"This will hurt the people they're trying to help. Rents will go up, and at the moment saving for a deposit is probably the hardest thing a first-home buyer can do. This will make it even harder."
Mr King did not comment on whether an investor exodus from the market would be good for first-home buyers, as supply increased and more people became able to afford to buy, rather than rent.
As for rising rents, Mr Little said they were rising 10 percent a year anyway.
"They're pushing up rents now. What pushes up rents is speculators in the market jacking up house prices, then needing to recover that from higher rents. That's happening now.
"You start to change the rules a bit and give favouritism to the first-home buyers, the people who actually want to live in the house they're buying, you change that."
Prime Minister Bill English, also appearing on The AM Show, sided largely with Mr King, saying Labour's policy would see rents jump without an appreciable uptick in the number of new houses.
"It puts up taxes on houses when we need more of them, not less of them. And I think if you combine it with Labour's policy to slash work visas, which will cut into the construction workforce, you've got a policy where you just won't get enough houses built."
Labour's plan to add to New Zealand's housing stock, KiwiBuild, aims to build 100,000 affordable houses in 10 years. Mr Little couldn't say how many of those would come in the first three years, admitting there would be a "ramp-up period".
"What voters can be sure about is you've got a party that's serious about making a difference and will make the start. We're not going to go around saying 'there is no crisis, don't look over here, and we'll fiddle around the edges'. We've got to do the big stuff."
Mr English says the Government is already planning new builds, but the numbers are still being finalised - and it will be up to the market to provide the majority.
"It's not going to replace what the market is doing."