Abolishing letting fees will lead to a rise in rents, the National Party warns.
Tenants will no longer have to pay hefty letting fees when renting a new home under a bill introduced to Parliament this week.
The bill will make it illegal for letting agents or landlords to charge a letting fee, and allows for damages of up to $1000.
Tenants can be forced to pay a fee, usually a week's rent, on top of upfront costs of up to four weeks' bond and two weeks' rent in advance to secure a rental property.
Housing Minister Phil Twyford called the fees a "bizarre anomaly".
"Letting fees are basically like a supermarket charging you to walk into the store for the privilege of buying their goods," he told the AM Show.
"What other area of the law allows two parties to contract for the exchange of services and then charge someone else? It's completely unjustifiable."
He said the fees should be gone by the end of the year.
But National's housing spokeswoman Judith Collins said the move will push up rents.
"If landlords have to pay these costs, they will have to get that money back from somewhere, or else they will simply take the hit.
"In another year, let's see if those rents have gone up at all."
Twyford said Scotland had abolished letting fees in 2012.
"And there is no evidence that it had any effect pushing rents up."
He said scrapping them would put up to $47 million into the pockets of Kiwi families each year.
"Banning the charging of letting fees to tenants is a good first step in improving the life of renters, while we continue our broader review of the Residential Tenancies Act."
The review will examine a range of changes including limiting rent increases to once a year and improving security of tenure.