Tax incentives for long-term rental options

“We’re providing an exemption from the interest limitation rules to certain types of new and existing build-to-rent developments in perpetuity,” Megan Woods said.

The Government is encouraging more long-term rental options by giving developers tax incentives for as long as the homes are held as long-term rentals, Housing Minister Megan Woods has announced.

“We’re providing an exemption from the interest limitation rules to certain types of new and existing build-to-rent developments in perpetuity,” Megan Woods said.

“To qualify, developments need to offer tenants leases of at least 10 years. Tenants can ask for shorter agreements if they wish and the development will still qualify for the exemption. Tenants will be able to break their tenancy agreements at any time, with a 56-day notice period. 

“We believe the security of tenure is critical for people who are renting. This requirement will enable people to settle and personalise their homes, reduce how often they must find a new place to live and all those associated moving costs, especially as people face the cost of living challenges, and help them to build and maintain connection to their community.

“We exempt new builds from the interest limitation rules for a period of 20 years to help steer investors away from the limited pool of existing properties and towards new housing supply to get Aotearoa New Zealand out of a housing crisis that was decades in the making.

"We recognise the big role the build-to-rent sector can play in filling a gap in the general rental market by increasing the supply, density, and diversity of housing.

“Aotearoa New Zealand needs to build more houses where they are needed and at prices that low- to moderate-income households can afford. Build-to-rent can help to continue the current momentum of new supply and improve the quality of rental housing with new warm, dry, secure homes,” Megan Woods said.

The move is being welcomed by Property Council New Zealand.

"Today’s announcement is one of the best levers to unlocking the potential of Build to Rent,” says Property Council New Zealand Chief Executive Leonie Freeman.

“We support the government’s desire to enable Build to Rent in order to provide warm, dry rental homes that offer Kiwis long-term security of tenure,” Leonie Freeman said.

Legislation to make the changes is expected to be introduced to Parliament at the end of August.

(With Inputs from New Zealand Government Press Release)