The Government is casting doubt on the Labour Party's maths after it announced it would phase out tax breaks for landlords and investors in a bid to dampen property speculation.
Labour leader Andrew Little announced the policy at the party's pre-election congress this weekend, which he hopes will "even the playing field" and help families "get a fair shot" at buying a home in a wildly overheated property market.
Labour expects to generate $150 million a year from closing loopholes, and removing the ability of property speculators to avoid tax on other income when they offset losses on a rental property - otherwise known as negative gearing.
SEE ALSO: Rachel Smalley: Labour is doing what National hasn't - confronting the housing crisis
Andrew Little told Mike Hosking this morning the policy will only target speculators.
"The ones that have multiple properties - the five, six, seven, eight residential dwellings owner - a lot more people are saying we've got to do something to level the playing field, to make it easier for those first home buyers."
In a decade the party estimates it will have $1.2 billion, which it wants to invest in insulating and heating up homes.
LISTEN ABOVE AS LABOUR LEADER ANDREW LITTLE SPEAKS WITH MIKE HOSKING
But Finance Minister Steven Joyce says he's not sure about their numbers.
"Internationally it's been shown that people who put in place these policies, it hasn't stopped the housing cycle," Joyce said. "Countries that have this policy in place still have the big fluctuations in price because it's largely driven by interest rates."
Joyce argues that Labour are scapegoating landlords, and believes abolishing negative gearing won't work.
"It would only push up rents and probably reduce the amount of construction going on in the housing market, which I presume is the kind of thing [Labour] don't want to see happen."
SEE ALSO: Property Institute slams Labour's housing policy
Labour's housing spokesperson Phil Twyford, however, has defended the numbers, saying that one in seven properties in Auckland are currently being sold to big time property magnates who "are hoovering up entire suburbs."
"First home buyers are being locked out of the market and this is happening, being turbocharged, by these tax loopholes that we're closing."
Labour's policy would also extend the time a property buyer must hold on to that property to avoid paying a capital gains tax.
Twyford believes the government's current tax has virtually no effect, and "pushing it out to five years will actually catch a lot more people and will mean that people are at least paying income tax on what have been massive windfall gains in the current housing market."
Yet the Property Investors' Federation argues that the very loopholes Labour are hoping to close actually benefit renters.
Executive officer Andrew King said closing the loopholes will increase the cost of owning a rental, which will increase rents.
"If you buy the average New Zealand home to provide it as a rental property, it's going to cost you about six thousand dollars a year," King claimed.
"If Labour's policy goes through, that will go up to ten thousand."
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