Landlords are selling up in droves as the Government's new tax rules take hold.
Some warn rents will continue to rise while a rental agency owner fears the doorway has opened for corporate identities ''who only care about the money''.
Under the changes, which come into force today, landlords will not be able to deduct interest costs of their mortgage as an expense off their tax bill, although "new" houses would be exempt for 20 years.
The Government says the changes will tilt the balance of the property market towards first-home buyers but landlords say it will just reduce the supply of rentals.
Rotorua Rentals director Pauline Evans said, in her view, the new tax changes gave landlords two options ''to quit and sell or increase rents to cover the cost''.
Some landlords had already sold while others were contemplating selling.
''This Government is making it harder for owners, put simply there are fewer good reasons to be landlords, especially when they are seen as being greedy. The majority of my owners got into rental ownership to provide for their retirement, and prevent them from becoming a burden to their children and the taxpayer.''
Evans said tenants desperate for accommodation were stressed and there were cases of overcrowding in houses.
''How do I decline three nice families and reward one with a home, how do I and my staff feel about that, how do the three families feel about being rejected for no reason at all?''
Rotorua Property Investors Association president Debbie Van Den Broek said she sold four properties out of her portfolio due to the tax changes.
''We had to prop them up out of our retirement savings and that is limited. So when that runs out, what do you do then when we have got nothing to live on?''
She knew a landlord who had to find an extra $4000 a year to cover the change.
She believed first-home buyers would benefit more from the Government developing a part ownership scheme with low deposits.
Tauranga Rentals owner Dan Lusby said at least 12 landlords had listed their properties to sell.
''They are selling them so they don't have mortgages or they are trying to get the remaining ones down as low as they can.''
Lusby said overseas there were more professional investors who owned big companies in the residential market, not mum and dad investors.
''We are going to see more of that happening here and those types of investors only care about the money, not the tenants.''
He acknowledged the Government's move would help first-home buyers but he said house prices were escalating and they would struggle to afford them.
''Banks can only lend and have 10 per cent of their portfolio with less than 20 per cent deposit so that is making it even harder for first-home buyers.''
On the other hand, due to supply and demand rent increases were inevitable.
Tauranga Property Investors Association president Juli Tolley said, in her view, new builds catered for different markets and would not replace the rental supply being lost.
Sher said if interest rates rose it could place further pressure on landlords.
''We've had rises in rates, insurance, rubbish collection, new compliance requirements requiring thousands of dollars of investment on top of normal maintenance.''
If landlords could not cover costs through rents they would most likely sell and that could spell even worse news if those houses were lost from the rental pool.
''So, where are the renters going to go?''
According to the Inland Revenue Department, the changes would give the Government $1.82 billion in additional revenue between 2021-25, depending on the interest rate.
Finance Minister Grant Robertson told NZME the impact on existing landlords was phased in over four years so they would get a 75 per cent deduction for the next 18 months from today.
"Those people who invest in housing for retirement income are often committed landlords who regard it as a long-term investment in which they would already expect a range of costs associated with homeownership such as rates, maintenance and fluctuating interest rates on their mortgage.''
He wanted people to consider investment in new housing if they wanted to ensure the interest deductibility rules applied to their mortgages on rental properties.
"The changes, announced in March, are designed to tilt the playing field away from speculators and toward first-home buyers.
'The whole thing just stinks'
Gail McDuff is one of the landlords quitting the rental market and says 'the whole thing just stinks'.
She decided to sell her Tauranga rental earlier this year ahead of new tax rules being introduced.
The Aucklander, 63, rented the property she owned in Greerton after she moved to Auckland some years ago.
''I was a pretty good landlord."
McDuff, who underwent brain surgery several years ago and has been unable to return to work, said she could not ''survive in the tax environment they were about to create''.
''I realised straight away that I couldn't afford to pay interest, which then wouldn't be deductible.''
The house sold in August and McDuff said she felt terrible for her tenant, who had only moved in a month before.
''I never intended to sell. I got the rental agency to apologise to him and when I went back down to Tauranga, I gave him a $150 grocery voucher.''
In her view, ''This Government was hell-bent on us not having anything to leave our children''.
''I'm not crying poor me ... but the whole thing just stinks.''