Renters are celebrating Labour's promise to close a property tax break.

The party has announced a policy to phase out negative gearing, the tax break which allows investors to claim tax deductions on other income if their rental property makes a loss.

The Property Investors Federation immediately slammed the idea, and warned it would make rents rise.

But two renter advocacy groups yesterday described the policy as a great move that would help the average person save for a home of their own.


Tenants Protection Association Christchurch manager Di Harwood said tenants shouldn't be worried about the policy backfiring on them.

"I would say some of that would be scaremongering.

"However, it may take out those property investors who buy property and leave it sitting, untenanted.

"It could well do that and that wouldn't be a bad thing.

"It may mean those houses could be bought by people who actually want the rental income from them. So they'll be on the market, not just sitting."

Harwood said it was difficult to see how cutting the negative gearing tax break would make things harder for the average landlord, as it was a perk at the end of the tax year, rather than a week-by-week cost.

Renters United spokeswoman Kayla Healey said the idea was "fantastic", and getting rid of negative gearing would be good for renters.

"Hopefully it will mean more renters, those who want to buy their first homes, will have the opportunity to.

"If we stop subsidising these really large-scale property investors, first-home buyers might have an opportunity without being outbid."

She said it was a common argument that such changes would push up rents.

"But at the moment, I think rents now are as high as they possibly could be.

"Demand is so high landlords are charging as much as they possibly can already.

"I don't think this would have any impact overall on rents. "

Prime Minister Bill English criticised Labour's policy, saying property speculators were already captured by Government and Reserve Bank initiatives.

A bright line test introduced in 2015 required people who bought and sold investment properties within two years to pay tax on the capital gain, regardless of their intent to make a profit.

The Reserve Bank has restricted lending by banks to owner-occupiers with deposits of less than 20 per cent and investors with less than 40 per cent.

The central bank's limits had captured "the people that [Labour leader] Andrew Little says he is after", English said.

Little, however, said National was "backing speculators" by defending the tax breaks on

He also criticised the lobby groups who had spoken against Labour's policy, saying New Zealanders deserved a proper debate on the issue.

"We've heard all this empty scaremongering from them before when depreciation was removed. It's self-interested nonsense."

Data provided to Labour by the Parliamentary library showed around 91,000 landlords - excluding companies or trusts - claimed $149 million in rental losses in 2015.

Of that total, 40 per cent, or $60 million, was claimed by people in the top 10 per cent of income earners.

Inland Revenue has previously defined the top decile as individuals earning around $83,000 a year after deductions.

Across the Tasman, the Australian Labour Party has also been calling for limits to negative gearing on residential property.