Landlords fear "working class" renters could be out on the street and the face of neighbourhoods will change as a loophole in new tax rules sway in the favour of properties used for social housing.
One rental agency owner called the move a "bribe", as interest off those mortgages was still tax-deductible despite the Government binning the kickback for most landlords.
Earlier this month, new rules came into force to stop landlords from claiming back mortgage interest as an expense.
The regulations would be phased in over four years but there were exemptions for new builds and properties leased to community housing providers for public, emergency and transitional housing.
A property investor said it was a huge incentive to drive private landlords into providing social housing and massage those numbers.
The Government said leases and redirects of private property were increasingly rare. Figures show nationwide there were 922 leases across New Zealand since June 2017 compared to 6825 new public houses.
Tauranga Property Investors Association president Juli Tolley said, in her opinion, the Government had manipulated the law to drive private landlords into providing social housing.
She believed it wouldn't work due in part to rules and risky tenants but there were still investors who would put some houses into the mix.
"That does decrease property availability for the working class."
Tauranga Rentals owner Dan Lusby said the Government was robbing Peter to pay Paul and good tenants could suffer.
"There is a shortage of social housing and if they take it out of our pool it's just going to make it worse. The Government doesn't seem to care about working people."
Rotorua Rentals director Pauline Evans said in her view the exemptions were a corrupt idea.
"I consider this a massive bribe, in total conflict with their wishes that we are all on the same team, with no racism, discrimination or inequality."
Evans said it could endanger the tenancies of those working families renting and it was an assault on the freedom of New Zealanders.
"There is already high levels of stress in our industry, tenants are fearful that owners will sell, or that rents will continue to rise, both are a reality."
Rotorua Property Investors Association president Debbie Van Den Broek said this was an attempt by the Government to increase social housing and massage the numbers.
"It's all smoke and mirrors."
She agreed the tax breaks were a huge incentive for landlords to evict hard workers and rent their homes to social housing providers. The deal was also extremely attractive for new investors.
Van Den Broek said if more landlords went into social housing it could change the face of neighbourhoods.
Unfortunately, some people who lived in social housing had issues, were on drugs, in gangs and caused trouble. Once in a house it was unlikely they would ever be evicted, she said.
Housing Minister Megan Woods said she didn't expect the tax proposals would lead to widespread switching of private rentals to public housing.
"It also has to be remembered not all rental properties are suitable for public housing."
There was a strong emphasis on building new public housing to increase overall supply, she said.
An additional 8000 public and transitional housing places would be delivered by June 2024, including 532 in the Bay of Plenty.
A spokesman for the Ministry of Housing and Urban Development said it would only accept private rentals under very limited circumstances through its housing providers.
The focus for public housing is on increasing new supply.
He said it was also really important not to label or stigmatise people who lived in public housing.
"There are many reasons why an individual, whānau or family might be struggling to find suitable and affordable accommodation – rents have climbed along with house prices and the country hasn't been building enough new homes to keep pace with demand."
Some people with complex needs like mental health and addiction issues lived in all parts of society including the homeless and public housing residents – this could include the homeless and public housing residents.
"These are vulnerable people who deserve our support and compassion, and a home."
Transitional Housing facilities also had support workers on-site and there was good evidence they achieve results, he said.
"Neighbours should understand that this is making a positive contribution to their community and is preferable to having rough sleepers or people missing out on the support they need in these neighbourhoods."