The Salvation Army Media Release

Limits on landlords' tax credits could boost housing affordability

Wellington, 21 June 2007 - The Salvation Army is backing further investigation of the Minister of Finance's suggestion to limit the tax credits able to be claimed by residential property investors as one factor that could improve housing affordability.

Social Policy and Parliamentary Unit Director Major Campbell Roberts says that although the current housing affordability crisis is the result of numerous factors, the favourable tax treatment given to residential property investors worsens the problem.

'Our broad estimate of the cost of the tax credits claimed by private landlords is at least $500 million annually and may be significantly more than this.

'The gain able to be made by landlords in tax write offs has to be seen against the $900 million which is already being paid out in Accommodation Supplements each year. The bulk of this expenditure is going to private sector tenants to help them pay their rents, which is a form of landlord subsidy.'

Major Roberts says the favourable tax treatment for residential property investors is clearly linked to housing inflation and the inability of modest income Kiwi families to ever own their own home.

'If the cost of paying inflated prices for houses is able to be written off against other taxes paid, then people will be encouraged to pay these unrealistic prices. Ultimately, lower income people are priced off the market and consigned to the rent trap.

Major Campbell says that reducing tax write-offs for landlords would most likely knock the top off further house price inflation, but would also discourage further private sector investment in rental housing and in a situation where extra housing is required this needs to be kept in mind.

'Although there is no easy answer to the issue and reducing tax credits is just a part answer to a complex problem, it is an idea worth looking into further.

'Successive governments over the last 15 years have largely relied on the market to provide affordable housing, but this experiment has not worked for hundreds of thousands of New Zealand families. At some point the Government has to step into the market and begin to build and finance affordable housing for low and modest income households.'

ENDS

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