The Property Investors Federation wants the Government to reconsider extending the brightline test.
It's being extended from two years to five, meaning profits on properties now bought and sold within five years will be taxable (other than the family home).
Executive officer Andrew King says the Government should introduce a hardship law for landlords who are forced to sell due to circumstances beyond their control.
"So if somebody did lose their job, had a terminal illness and had to sell, that they [don't] have to pay this extra tax. It does seem unnecessary - it doesn't apply to any other investment."
Mr King also says extending the brightline test won't impact house prices or speculators, but will influence availability.
"It's going to make it more difficult for them compared to other investments. If you buy shares, you won't have that five-year brightline test. You can make all the capital gains in the world… and sell anytime you like, and you'll be able to keep those profits."
But Revenue Minister Stuart Nash said on Thursday that was the point of the legislation.
"We need investment which grows the economy and creates jobs, not the sort of investment which distorts the residential housing market. This measure will bring fairness back into the tax system."
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He also said the changes would improve affordability and availability.
"Reducing speculative demand will also help improve housing affordability for owner-occupiers. Current exemptions from the bright line test will remain. This includes the exemption for the main home of owner-occupiers of residential property."
Auckland housing prices have stabilised in recent months, after years of double-digit growth.