Prime Minister Christopher Luxon says renters are "very grateful" his Government is bringing back interest deductibility for landlords.
The policy means landlords will again be able to deduct interest costs on their mortgages against rental income.
Associate Finance Minister David Seymour announced in a statement on Sunday that landlords will be able to claim 80 percent of their interest expenses from April 1, 2024, and 100 percent from April 1, 2025, onwards.
There is no provision for landlords to backdate interest deductibility to the 2023/24 year, despite it being in ACT and National's coalition agreement.
The changes come after Labour, which has since dubbed the deductions a "landlord tax cut", phased it out while in government.
Speaking to media at a mobile breast screening clinic in Auckland on Wednesday, Luxon defended the policy.
"It's one of the things we campaigned on because we care about renters in New Zealand," he said.
"What has been utterly unacceptable is that there's been a $170 per week increase in rents under the previous government and they just kept going up and up and up.
"And a big reason for why they go up is because landlords have been hit with costs associated with the removal of interest deductibility and also the extension of the brightline test, and those costs have just been passed straight through to renters with higher levels of rent."
Luxon, who owns rentals himself, said the policy was about putting "downward pressure on rents for renters".
He denied there had been backlash on the policy.
"I think if you're a renter, you're very grateful for the fact that actually costs that have been passed on to landlords are not being passed on to you," Luxon said.
"That's exactly what has happened, when the last government made that decision, and it was a dumb decision, it wasn't an appropriate decision, it was wrong, we opposed it from the beginning, for that very reason."
Luxon added that New Zealand had a "major problem" with housing supply not only for rentals but also buyers and social or state housing.
"So actually, increasing the supply of rental properties by making sure landlords aren't actually removing their properties from the rental market, that they aren't adding those costs of interest deductibility and brightline implications onto the rents, is actually a very good thing," he said.
