Property Investors Are Not the Cancer. Bad Policy Is.

There is a narrative doing the rounds in New Zealand politics at the moment that property investment is a "cancer" on the economy.

The argument goes like this: every dollar that goes into residential property is a dollar that should have gone into a "productive" business. Property investors add nothing. They simply outbid first-home buyers, sit back, collect rent and clip the ticket. It is a neat political slogan. It is also wrong, and dangerous.

Labour has now put this thinking into tax-policy language, arguing that our system rewards "property speculation" rather than people creating jobs, and proposing a targeted capital gains tax on commercial and residential investment property sold after 1 July 2027, while exempting the family home, farms, KiwiSaver, shares, business assets, inheritances and personal items. ^[1] Once you define an entire class of investors as parasites, it becomes easy to justify punishing them. But if the diagnosis is wrong, the treatment will be wrong too. The patient, in this case, is the New Zealand housing market.

What is productive investment?

Productive investment is capital put to work in a way that creates, improves, maintains or delivers goods and services people actually need. A truck is productive because it moves freight. A factory is productive because it produces goods. A software company is productive because it solves problems at scale. A medical practice is productive because it provides healthcare. So why is a rental home suddenly "unproductive"?

A rental home shelters a household. It is funded with private capital. It carries private risk. It requires repairs, maintenance, insurance, rates, compliance, debt servicing, administration and management. If a property investor builds a new dwelling, subdivides a section, converts a tired house into a warm and compliant rental, adds a minor dwelling, funds a townhouse development, or provides long-term accommodation to a family that is not in a position to buy, that is productive activity. Housing is not optional. People need somewhere to live.

What is non-productive investment?

That does not mean every property transaction is equally productive. Economists distinguish between investment that increases the productive capacity of the economy and investment that merely captures scarcity value. That distinction is important. If capital creates a new dwelling, improves an existing dwelling, increases density, brings underused land into use, or provides well-managed rental accommodation, it is increasing the supply or quality of housing services. That is productive.

But if capital is used simply to sit on scarce land, wait for zoning uplift, keep a property vacant, or block development while hoping the market does the work, that is different. That is not creating more housing. It is not improving the housing stock. It is not adding capacity. It is simply profiting from scarcity. In plain English, some property investment makes the pie bigger. Some just fights over the existing pie.

Land banking with no intention to develop is often non-productive. Keeping a property vacant and doing nothing with it is non-productive. Speculating purely on zoning scarcity while opposing new supply is non-productive. Poor-quality landlords who neglect maintenance and treat tenants badly are not helping anyone. But that is not all property investment. That is poor investment behaviour by a minority within a much larger pool of productive providers of an essential service: housing.

We do not call all business investment unproductive because some businesses fail or are inefficient. We do not call the sharemarket a cancer because some companies are overvalued. We do not call farming a blight because some operators are inefficient. Yet property investors are routinely treated as one homogeneous group of villains. That is the mistake. Or worse, it is deliberately weaponised political language designed to win votes by fuelling resentment. It does not consider what New Zealand actually needs. It is identity politics creating a villain to win votes and justify socialist ideology. The effect is capital flight, not a better society everyone can prosper in.

Blunt-force policy breaks things

A sophisticated economy should be able to tell the difference between investors who create housing supply, improve housing stock and provide long-term rental accommodation, and speculators who simply sit on land or flip houses. Policy that cannot make those distinctions is blunt-force policy. And blunt-force policy breaks things.

Here is the part that gets conveniently ignored: private landlords provide the overwhelming majority of rental homes in New Zealand. In the 2023 Census data presented by Figure.NZ, 84.6% of renting households where landlord type was known rented from a private person, trust or business. Kāinga Ora/Housing NZ accounted for 11.2%. ^[2] So when politicians attack landlords as "speculators", as if they are an optional nuisance engaged in a greedy occupation rather than providers of an essential service, they are attacking the people who provide most of the rental accommodation in this country. The irony of the left pining for more, cheaper housing while making supply more expensive and difficult through anti-landlord policy is incredible.

Could the state provide all of that housing instead? In theory, maybe. In practice, no. Not quickly, not cheaply, not at the scale required, and certainly not without taxes rising substantially somewhere else. The rational policy question is not, "How do we drive investors out?" It is, "How do we encourage the right type of investment into the right type of housing?" That means new supply, better supply, warmer homes, more choice, more competition, sensible density, faster consenting, less infrastructure obstruction, sensible tax rules and a functioning development pipeline.

Existing houses and the rental market

The common counterargument is this: "But if an investor buys an existing house, they have not created a new house." On day one, that may be true. But it does not mean the investment contributes nothing. The home may become rental stock, remain rental stock, be improved, or later be intensified into additional dwellings.

Many tenants are not in a position to buy. They may not have the deposit, the income, the finance approval, the stability, or the desire to own. A growing and mobile country needs a healthy rental market as well as pathways to home ownership. Over time, properties get run down. Landlords provide the capital and management required to maintain, repair and rejuvenate those homes. Damage, arrears, vacancy, compliance costs and disputes are all part of the commercial risk of providing residential accommodation.

Scare off investors and tenants pay

The danger of anti-investor rhetoric is that it does not stay as rhetoric. It becomes tax policy, lending policy, tenancy policy, compliance cost and political risk. When investors become uncertain, they do what any rational capital provider does: they pause, sell, deleverage or go elsewhere. Developers lose presales. Banks become more cautious. Projects are delayed. Builders and subcontractors lose work. New supply slows. Existing landlords exit. Tenants have fewer options. When tenants have fewer options, rents rise. This is not ideology. It is supply and demand.

The Ministry of Housing and Urban Development's March Quarter 2026 update shows the same mechanism working in the other direction. Rental inflation softened as rental supply lifted and tenant demand dropped. New-tenancy rents fell 0.4% in the year to March 2026, existing-tenancy rents rose only 0.7%, and the report notes that increased rental supply and lower tenant demand were putting downward pressure on asking rents. ^[3] More supply and less pressure equals softer rents. Reverse it and you get the opposite: less supply, more pressure, higher rents.

Some say that when one landlord sells a house, another takes over and the rental supply continues. Often that is not correct. When landlords are browbeaten, overtaxed or disempowered by poor tenancy policy, many buyers in the market are not landlords. They are first-home buyers. They buy the houses and the rental supply shrinks. That means fewer rentals and higher rents. It is not rocket science, but too many on the left do not seem able to join the dots. Nor do they appear to care what a mess they leave to the next government to clean up.

Immigration settings matter too

Housing policy also needs to be honest about immigration. New Zealand needs a baseline level of population growth to keep the property and construction economy functioning. Too much migration, too quickly, puts pressure on rents, infrastructure and services. Too little demand, however, destroys confidence, stalls projects, empties the presales pipeline and throws builders, subcontractors and developers into the grinder. The answer is not open slather and it is not slamming the door shut. It is a balanced migration setting that supports labour supply, household formation and construction demand without overwhelming infrastructure.

Stats NZ reported a net migration gain of 24,200 in the March 2026 year, compared with an average March-year gain of 31,400 from 2002 to 2025. ^[11] That is the sort of data point policymakers should pay attention to. Housing supply needs capital, confidence and customers. If politicians wipe out demand at the same time they attack investors, they should not be surprised when construction falls over and capacity disappears. Once builders leave the sector, it is hard and slow to get them back.

Taxing revenue as if costs do not exist

One of the worst examples of anti-investor policy was the interest deductibility restriction. For a period, residential property investors were restricted from claiming interest costs that any normal business would recognise as a legitimate cost of earning income. Inland Revenue states that from 1 October 2021 to 31 March 2025 the rules restricted the ability to claim interest, with 80% deductible for the 2024-25 year and 100% deductible again from 1 April 2025. ^[4] That is not sound tax policy. That is political targeting. When you tax people on a profit they have not actually made, they either increase prices, reduce investment, or exit. Again, tenants are the ones left exposed.

I saw this in real time during the last Labour government. My business partner, Salesh Chand, and I owned more than 50 residential houses rented predominantly to community housing providers. When the interest non-deductibility rules made the investment uneconomic, we started selling and exiting the market. We gave notice on around 10 properties and listed them for sale. I then received a call from a manager at Emerge Aotearoa. The Minister's team was apparently surprised that landlords were selling up and that community housing providers were receiving termination notices.

But the answer was obvious: the policy had made the investment uneconomic. That is where ideology meets reality. The Crown could not simply replace the role of private landlords at scale. Labour eventually exempted residential housing leased to community housing providers from the interest non-deductibility rules. That should have been a lesson. If you make rental investment uneconomic, capital leaves. When capital leaves, tenants are exposed.

The real productivity agenda: savings and capital

If politicians are serious about making New Zealand more productive, the answer is not to demonise property investors. The answer is to build a deeper pool of domestic capital. Australia has shown us the model. Its compulsory superannuation system has created an enormous national savings pool. APRA reported total Australian superannuation assets of about A$4.44 trillion at March 2026. ^[5] New Zealand KiwiSaver assets were about NZ$123.1 billion at March 2025. ^[6] In gross dollar terms, Australia has roughly 35 times the retirement-savings capital pool of KiwiSaver. Even if you generously call Australia seven times New Zealand's population, the capital pool is still five times larger than population alone would explain. On current official population estimates, Australia is closer to five times New Zealand's population, which only strengthens the point. ^{[7] [8]}

Entrenched savings make a country richer. They give businesses access to patient capital. They give fund managers the scale to invest in infrastructure, private equity, venture capital, commercial property, listed markets and long-term development. They create a domestic capital base so we are not always passing the hat around offshore. If we want more capital going into productive business, make KiwiSaver compulsory and much larger, say 10% plus over time. Move closer to the Australian model. Build the savings base. Let compounding do what compounding does, as it has done in Australia to great effect.

Then go one step further: introduce a proper self-managed superannuation model, again learning from Australia. Large fund managers have their place, but they are not always good at granular, local, entrepreneurial investment. Self-managed super can connect private investors with SME capital needs in a way large institutions often cannot. I have seen this work in Australia. Partnerships of private investors use self-managed super funds to invest in commercial property, office blocks, pubs, industrial buildings and operating businesses. Properly regulated, that sort of structure links retirement savings with real-world SME capital formation. That is a serious productivity policy. It is a better answer than chanting that landlords are a cancer.

Commercial property is productive too

The "property is unproductive" argument becomes even weaker when commercial property is dragged into the same net. Offices, warehouses, factories, shops, medical centres, childcare centres and industrial yards are property assets. Businesses operate from them. Workers work in them. Goods move through them. Services are delivered from them. If commercial property investment is "unproductive", then where exactly is the productive economy supposed to operate? On a cloud?

The real problem is scarcity

New Zealand's housing problem has never been caused simply by "too many investors". The real problem is scarcity: scarcity of zoned land, infrastructure capacity, efficient consenting, political courage and long-term thinking. When homes are scarce, everyone fights over the same limited stock. The solution is not to shuffle blame. The solution is to increase supply, which was shown in Auckland when the Unitary Plan enabled more housing and helped take pressure off prices.

HUD's March 2026 market update notes that 37,534 new dwellings were consented in the year to February 2026, up 11.7% on the previous year, while also warning that developers remain cautious and may delay or scale back projects under cost and uncertainty pressures. ^[3] That is the knife edge. We need more housing, but the people who fund and build housing need confidence to act. You cannot insult capital on Monday, tax it on Tuesday, regulate it on Wednesday, and then complain on Thursday that not enough houses are being built.

The real solution to housing scarcity is already partly under way: more density. The Medium Density Residential Standards were designed to allow more homes on existing urban land, particularly in larger and faster-growing centres. The settings are now changing, with MDRS made optional for councils and Auckland moving through its own Plan Change 120 process, but the underlying direction remains right: allow more dwellings where infrastructure, transport and services already exist. ^{[9] [10]}

Densification will not solve everything. It still needs infrastructure, financing, consenting discipline and projects that stack up. But it changes the equation. More townhouses, duplexes, minor dwellings, apartments around transport corridors and efficient use of serviced land all help. The answer is not less capital in housing. The answer is more housing from every sensible channel: greenfield development, brownfield redevelopment, infill, intensification and private rental investment.

Local bodies are joining the tax grab

Central government is not the only problem. Local bodies have worked out that new housing is an easy place to load cost. Auckland Council's proposed development contribution settings were a warning sign: reported proposals included Tāmaki jumping from about $31,157 to $119,000 per lot, plus GST in practice for developers. ^[12] Even where final adopted settings were softened after strong pushback from developers, including through SANZ, Auckland Council still says contributions vary by area and are designed to recover growth infrastructure costs. ^[13]

A charge at that level is absurd. It can be more than the physical cost of supplying a very small basic dwelling shell, before the buyer even gets a kitchen, bathroom, land, finance costs, professional fees, margin or GST. If councils are spending so much more on infrastructure than the market can bear, New Zealand needs to ask why. Are councils simply inefficient? Are procurement systems broken? Are gold-plated standards and consultant layers making everything impossible? Or is there something worse buried in the system? I am not making allegations here. I am saying the numbers are now so extreme that they deserve proper scrutiny. Recall Auckland Transport saying in 2024 that a new pedestrian crossing cost $425,000 plus GST. Absurd. That is a topic for another article, but it belongs in this debate because every dollar loaded onto a new dwelling is ultimately paid by a buyer or tenant.

Lift everyone up, do not weaponise envy to grab votes

The politics of envy is seductive because it offers a simple villain. It tells struggling households, "You are behind because someone else got ahead." This is classic identity politics. Sometimes there is unfairness, and we should call it out. But envy is not an economic strategy. Punishment is not a housing plan. Demonising investors will not build a single house.

The better approach is policy that lifts everyone up. Help first-home buyers by increasing supply, improving infrastructure and reducing the artificial constraints that make land expensive. Help tenants by encouraging more rental stock and better-quality homes. Help developers by making projects feasible. Help businesses by making New Zealand a more attractive place to invest. Hold bad actors accountable, enforce standards, stop land banking where it blocks development, and make sure the tax system is coherent and fair. But do not tar an entire sector because it is politically convenient.

Property investors are not the cancer in the economy. Bad policy is the real cancer. A healthy economy needs business investment, sharemarket investment, infrastructure investment, commercial property investment, residential development, rental housing, deep retirement savings, sensible immigration settings and ordinary Kiwis building wealth for retirement. The question should not be, "Who can we tear down?" The question should be, "How do we create more opportunity, more supply, more productivity and more prosperity for everyone?" That is the debate New Zealand should be having.

Sources

1. Labour Party release / policy material on targeted capital gains tax proposal for commercial and residential investment property sold after 1 July 2027.
2. Figure.NZ / 2023 Census landlord type data.
3. Ministry of Housing and Urban Development, Housing Market Update, March Quarter 2026.
4. Inland Revenue guidance on residential property interest rules.
5. APRA, Quarterly Superannuation Statistics, March 2026.
6. FMA KiwiSaver Annual Report 2025.
7. Australian Bureau of Statistics, national population estimates to December 2025 / 2026 release.
8. Stats NZ, National population estimates at 31 March 2026.
9. Ministry for the Environment guidance on Medium Density Residential Standards and related NPS-UD settings.
10. Auckland Council material on Plan Change 120 / withdrawal of PC78 and replacement density framework.
11. Stats NZ, Net migration gain of 24,200, March 2026 year.
12. Public reporting on Auckland Council's proposed 2025 development contribution increases, including Tāmaki.
13. Auckland Council / OurAuckland, New Development Contributions Policy approved, May 2025.
14. Public reporting on Auckland Transport's 2024 pedestrian crossing cost estimate.