Prime Minister Jacinda Ardern points blame at National over rising rental prices

Prime Minister Jacinda Ardern has denied the Tax Working Group's (TWG) proposal of a capital gains tax (CGT) has prompted rental prices to increase in New Zealand. 

Housing rents across the country increased 0.2 percent in February, taking the annual rental increase to 3.3 percent, Stats NZ's rental price index for February showed. 

National leader Simon Bridges connected the increase in rental prices to the TWG's proposed CGT, asking the Prime Minister in Parliament on Wednesday if the proposal has caused owners to increase their rents.  

"Does she accept that the proposal of a capital gains tax is already having an effect on rent inflation?" Bridges asked the Prime Minister, to which she replied: "No, I do not."

"Yes, we have an issue with rental prices in New Zealand, I accept that. What I do not accept is [Bridges'] assertion that it isn't about supply - it is, and that's why you see increases in the areas where we have a lack of houses," Ardern said. 

"We know when it comes to rent that supply is the biggest issue that we faced and... because of the last government's inaction, we have had to try and rebuild what has been an absolute crisis situation."

The Prime Minister outright rejected Bridges' assertion that the proposed CGT has had an effect on rental prices. But Westpac chief economist Dominick Stephens has said the prospect of a CGT would have a "strong" impact on house prices.

The Prime Minister pointed blame at the former National-led government.
The Prime Minister pointed blame at the former National-led government. Photo credit: Parliament TV

And in its February report, the TWG's own workings estimated a CGT would result in small rent increases initially. But it said that would be offset by more people exiting the rental market as home ownership became more accessible.

New Zealand already has a variation on a CGT, the Bright-line test, introduced in 2015 by the former government. It required income tax to be paid on any gains from residential property that was sold within two years of purchase (increased to five years last year). 

Ardern said she did not believe a CGT would increase rents, "just like [Bridges/the National Party] clearly didn't think it would be an issue when he brought in a Bright-line test which was a form of capital gains tax". 

When Bridges asked Ardern why rental prices had gone up in the last 18 months under her watch, she said the statistics she'd seen "were actually not too far off the exact increases under the last government and that's because it does take time to build houses". 

"Unlike that last government that sold state houses, that did not do enough to expand the availability of affordable housing, that did not do enough on the issue of homelessness," Ardern said. 

"We are a Government who came in and put a stop to the sale of state houses and actually started building homes."

Bridges questioned Ardern's assertion that houses were being built. He asked: "How can she, hand on heart, criticise the last National-led government, when under her government, KiwiBuild has done a sum-total of 33 new houses?"

"I dispute those numbers," Ardern responded, adding that the Government had so far "contracted over 10,000" KiwiBuild houses. 

The official KiwiBuild website shows 74 houses have been completed so far, while 10,356 houses have been contracted and committed to be built. 

Ardern and Housing Minister Phil Twyford announced in January that the interim KiwiBuild targets had been dropped after the scheme fell short of delivering 1000 homes by the end of the first year as was promised.