Labour MP David Parker brushes off landlords' threats to hike rents

Labour MP David Parker has rubbished a landlord's claim he'll put his rents up $135 a week in response to the Government's changes to property tax rules.

On Tuesday Prime Minister Jacinda Ardern, Housing Minister Megan Woods and Parker - as Revenue Minister - announced investors and speculators would no longer be able to reduce their tax liability by counting interest on borrowing as an expense. The change will be phased in over four years, and applies to any residential properties which change hands from Saturday onwards. 

The Government says it's unfair that landlords can do this to make more money, while owner-occupiers can't, and are left paying potentially hundreds of dollars a week in interest. 

But investors reacted in horror. One told The AM Show host Duncan Garner he had more than 40 properties, had just increased his tenants' rents by 10 percent, and would be hiking them again as soon as he could - by $135 a week. 

"I'm going to pass the new tax to the tenants," he said in an email.

Parker told The AM Show on Friday he had doubts the landlord's threat to hike rents this much was genuine. 

"If he could have, he already would have. Highly leveraged landlords, they put their rents up as much as they can already. The constraint on rents is what people can afford... not tax rules. This is going to make a difference." 

Finance Minister Grant Robertson earlier this week said the landlord's tenants have the option to "go looking elsewhere".

"What we know about rents is they are primarily a product of demand and supply and people's ability to pay." 

National MP Simon Bridges, appearing with Parker on The AM Show, said rents would "continue to go up" thanks to the change.

"We think about the single biggest cause of poverty in New Zealand at the moment, that's it. I just think look, it's not going to solve a heck of a lot, actually it's going to make things worse... it doesn't build a single new house."

The Government announced a separate policy on Tuesday to facilitate the building of new properties. The tax changes don't apply to new builds - only if an investor is buying an existing property, so not contributing to increasing supply. 

The hope is this will encourage investors to put their money into new builds and expand the supply of rentals and homes available for owner-occupiers. 

David Parker.
David Parker. Photo credit: Newshub.

Parker said it was a complex problem to solve. 

"Everyone says housing costs too much, rents are too high - then we do something bold to tilt the playing field in favour of first-home buyers instead of people who own multiple houses, highly leveraged, deducting their interest bills for tax, who are outbidding people who are living in houses. 

"We think you've got to change something. These are difficult decisions - we're worried that this bubble was going to pop."

Ardern and Robertson are on the record as saying they don't want prices to go down, even after last year's record rises.