Negative gearing

The Herald reports:

Labour has confirmed it will introduce a policy to remove tax breaks on investment properties but aims to target speculators rather than small-time landlords.

Labour’s housing spokesman Phil Twyford has released Inland Revenue figures which showed property investors claimed $650 million in tax write-offs on residential rental properties in the year to March 2015.

His party now plans to crack down on negative gearing, which allows landlords to claim tax deductions on their rental properties.

Labour will consult on its policy to remove negative gearing over the next few months and was aiming for a design to capture speculators rather than longer term, small investors such as those using a rental as a retirement investment.

That included considering options such a cap on the number of houses negative gearing could apply to and grandfathering the policy so it did not apply to current landlords.

There may be significant unforeseen consequences here. Such a policy could lead to a significant increase in rents, as landlords will be less happy to wear a loss in the initial years as a mortgage is high.