Bright-line test extension draws criticism

by Roxanne Libatique25 Mar 2021

The government’s new housing package sees the bright-line test doubled to 10 years, with an exemption to incentivise new builds. The industry has largely welcomed the package, but some have expressed their concern on the bright-line test extension.

The Real Estate Institute of New Zealand (REINZ) has warned that the extension is not a “magic bullet” in terms of solving New Zealand’s housing affordability issues, nor will it do anything to increase housing supply.

Wendy Alexander, the acting chief executive at REINZ, explained that the extension would likely lead to residential property investors holding on to their properties for even longer to avoid paying tax, thereby further reducing the total pool of properties available in the market.

New Zealand Taxpayers’ Union aired the same thoughts, calling out Finance Minister Grant Robertson for breaking his promise not to extend the bright-line test.

“Grant Robertson made a clear promise not to extend the bright-line test. He’s now broken that promise,” said New Zealand Taxpayers’ Union spokesman Louis Houlbrooke. “You don’t make housing cheaper by taxing it.

“Making property investment more costly, through both the bright-line test and the removal of interest deductibility, will make it even less attractive to be a landlord. Instead of renting out a second home to a family, property owners will stick one of their kids in it, meaning fewer properties available to renters, and higher rents as a result.”

The Property Council of New Zealand is calling on the government to prioritise other measures to address the housing crisis and clarify their intentions to ensure industry and policymakers are working in concert – including urgent Resource Management reform, considering interim measures to speed up supply, and clarifying whether Build-to-Rent housing will be included in interest deductibility and bright-line issues.

“Investing more into speeding up developments is welcome news, but such investment needs to get into the hands of builders and developers sooner rather than later. This, coupled with using the Resource Management fast-tracking legislation and embracing the potential of Build-to-Rent housing, would speed up the construction of housing in New Zealand,” said Leonie Freeman, the chief executive at Property Council New Zealand.

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