Treasury officials mooted the prospect of the Government implementing rent control measures in a bid to offset the "negative impacts" of recent housing policy changes.
They are also looking into implementing a "stamp duty" – a tax property investors pay on legal documents used when a house is sold – to reduce demand in the housing market.
This is according to newly released information ministers received from officials before unveiling the first tranche of their housing policy last month.
Although the Government has yet to make any announcements on a rent control scheme, Finance Minister Grant Robertson has refused to rule it out.
"That's not on our agenda at the moment, but we will keep an eye on what happens," he told the Nation last month.
He was being asked about the Government's housing policy changes to extend the bright-line test, increase First Home Grant caps and pour close to $4b into a housing infrastructure scheme.
This morning, the Government released a plethora of advice it received before making the housing announcements.
Advice from the Ministry of Housing and Urban Development (HUD), provided to Megan Woods three days before Christmas, elaborated on a number of concerns officials had about the impact of the policy.
There were four main ways officials said landlords could react to the policy changes:
• Increasing rent to cover additional costs
• Take their property out of the rental market
• Reduce costs by lowering maintenance
• Sell one or more properties
But officials had a potential solution to these risks – "rent control".
This is a policy whereby the Government places a ceiling on the amount a landlord can charge for rent.
Officials said advice on this was being prepared, after it was requested by Woods.
HUD officials said: "The Treasury advice noted that rent control measures could be drafted to offset or limit negative impacts of adjustments to tax policy changes on rent prices.
"If the Government introduces a temporary rent control then this could incentivise more investors to sell, but international evidence shows that those that retain rental properties will try to find other ways to increase rental income and/or increase rents up as soon as the period of rent control ends."
Officials noted that although rent increases are not widespread, they have been shown to lead to discrimination by landlords on factors other than price, or could encourage
tenants and landlords to make/accept illegal additional payments.
"Once in place, rent controls are difficult to remove as the removal leads to a price correction, which is greater the longer controls are in place."
The "next steps" section of the HUD report has been redacted.
Opposition parties have come out strongly against a rent control scheme – Act deputy leader Brooke van Velden said the prospect of rent controls would "fuel a rocket of uncertainty".
National's finance spokesman Andrew Bayly said by not ruling out rent control measures, Robertson was upsetting a "huge number of mum and dad investors".
HUD officials also noted that: "The Treasury has been considering other tax options too, for example introducing a stamp duty".