5. Question No. 5—RevenueANDREW BAYLY (National—Port Waikato) to the Minister of RevenueQuestion No. 5—Revenue5. ANDREW BAYLY (National—Port Waikato) to the Minister of Revenue: Is the Government committed to removing the ability for interest expense to be deducted from residential rental income; if so what is the expected increase in annual tax payable from the 2025/26 tax year for an investor who owns a typical rental property in Auckland?Hon DAVID PARKER (Minister of Revenue): Yes the Government is committed to this policy. It is part of our coordinated response to the housing crisis. It will ensure that first-home buyers and owner-occupiers get a fair go and it will also head off the economic risk of an out-of-control housing bubble. Regarding the second part of the question the answer will depend upon a number of variables including the amount of rental income interest rates in five years' time and the amount of debt if any an investor has over their properties. If an investor invests in new homes there will be no increase. This is because new builds are exempt.Andrew Bayly: Does he agree with the joint advice he received from the Treasury IRD and the Ministry of Housing and Urban Development dated February 2021 that under his policy a landlord with a $700000 mortgage would face a tax increase of $9240 a year?Hon DAVID PARKER: That would depend upon future interest rates—in respect of which I note that upon the announcement of our policy the New Zealand exchange rate immediately dropped because there was a baked-in expectation from the market that interest rates were going to have to be raised by the Reserve Bank to head off a housing bubble. As a consequence of what we've done interest rates will be lower for longer than they would otherwise have been. I also note that Westpac reported following their analysis that removal of deductibility of interest would remove the 10 percent extra growth they expected in house prices over the rest of the year. So in our view on this side of the House we're actually doing something that's working.Andrew Bayly: Is it fair that a mum and dad landlord will have to pay $9000 every year in additional tax after an election where the Government promised no tax increases?Hon DAVID PARKER: Well that's not necessarily true; it depends upon the factors that I've already outlined. But I would note that landlords did not decrease rents when interest rates dropped over the last decade.Andrew Bayly: Does he realise that when a landlord is faced with a tax increase of over $9000 a year the likely outcome is that they will either put up the rent or sell their rental property?Hon DAVID PARKER: I don't think that's necessarily correct.Andrew Bayly: Is the objective of this tax policy to make people sell their rental properties?Hon DAVID PARKER: No it's not but if they didn't the house would not erupt in flames and disappear.Andrew Bayly: What is the message to New Zealanders who will have to sell their one rental property that they have invested in for their retirement because he's increased the tax bill?Hon DAVID PARKER: I think the majority of New Zealanders do not like the fact that an increasing proportion of New Zealand's housing stock is owned by people who own many houses and the rate of homeownership has been dropping. I also repeatedly had feedback from New Zealanders following this message that they're pleased to have a Government that's actually taking material steps to address the housing crisis across a number of decisions on both supply and demand side. They note that other parties call for change and then oppose every change that is proposed.