Landlord Association Calling For Perpetual Interest Deductibility To Be Restored To Long-term Landlords

The Auckland Property Investors Association Incorporated (“APIA”) calls for the government to immediately restore perpetual interest deductibility to any landlord who offers tenants long-term tenancy.

In August, the government announced its intention to restore perpetual interest deductibility to institutional build-to-rent developers. One caveat is that the developed property must be offered to tenants as long-term tenancies of at least ten years. This policy is set to become law by the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2). The bill is currently at the committee stage.

“We recognise that, in time, institutional build-to-rents will be a pivotal chapter to the New Zealand housing story. But these are not projects that can be stood up overnight,” says APIA President Kristin Sutherland. “It will take years before the build-to-rent sector can add to our rental supply in a material way.”

Most tenants do not live in build-to-rent properties. And they won’t for several years.

“But that doesn’t mean security of tenure should have to take a backseat,” says Sutherland. “There are existing rentals on the market right now that the landlord would offer up as long-term tenancies. And they should be appropriately incentivised to do so.”

It makes little sense to encourage only build-to-rent developers to offer long-term tenancies. “If security of tenure is as critical as the government says it is, then surely the most effective solution is to get buy-ins from the entire rental sector and not just a minority of would-be landlords.”

“We can deliver security of tenure up and down the country right away if perpetual interest deductibility is restored to any landlord who offers tenants fix-term tenancies of at least ten years in much the same way the government is asking the build-to-rent developers to do.”

The Association’s general position is that interest limitation is unprincipled, born out of a knee-jerk reaction to outdated economic conditions and should be abolished. In the absence of a complete repeal, APIA is recommending to the Finance and Expenditure Committee that the build-to-rent carve-out should be broadened to include, among others, landlords who offer long-term tenancies.

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