Government Lobbied Over New Asset Class
The Government’s proposed changes to the interest deductibility rules will have a significant chilling effect on increasing housing supply at scale and pace, says the Property Council.
1 August 2021
Chief executive Leonie Freeman says that while the council supports the Government using its whole toolbox to build more houses, the proposed changes make it less likely investors, developers and owners are going to help the Government build more houses.
“While exempting new builds is encouraging, the Government has an array of levers it can pull to incentivise more housing to be built that don’t pull the rug out from under the feet of investors and developments,” she says.
The Property Council is supporting build-to-rent (BTR) as the best option for increasing housing supply at pace. It is lobbying the Government to carve out BTR as a new asset class that aims to provide long-term rentals where tenants are treated as customers.
“To amplify the potential of BTR, the Government needs to create the right settings,” says Freeman.
If the tax changes go ahead the council says emerging asset classes like BTR are at risk of being deemed unviable by domestic developers.
“Not only is there not enough certainty regarding how interest deductibility will work in the second hand market, but without a specific exemption investors will be reticent to invest,” says the letter.
Freeman says rather than disincentivise flipping and speculating, the changes will disincentivise legitimate new supply coming onto the market and will stifle the Government’s objectives of building more houses.
The council has specifically requested the Government exempt BTR developments from the interest deductibility proposal to encourage a “dynamic new asset class”.
Freeman says feedback the council has received is compelling – these rule changes will make it much more difficult for BTR’s potential to be unlocked.
“The Government has long said it aims to tackle New Zealand’s housing crisis and help more Kiwis into homes.
"It should not be tinkering with tax settings to make developments more difficult for investors and developers.
“Instead of robbing Peter to pay themselves, the Government should focus on reforming planning laws, allowing councils to free up more land, supporting the development of local infrastructure and reducing costs and red tape on new supply to house more New Zealanders.”