The admission by Act leader David Seymour that he has had to backtrack on a coalition agreement regarding interest deductibility for landlords may throw some light on how our first three-party Government will work.
Under the Government’s recent announcement, landlords will be able to write off 80 percent of their mortgage interest from April 1 this year and 100 percent from April 2025.
The original agreement between Act and National would have seen landlords get a backdated 60 percent deduction in the 2023-24 financial year, which would have effectively brought landlords a tax refund.
Seymour tried to explain the change by saying that a backdated deduction would have added more complications and was probably not worth the amount of benefit it would have given. “What we have done is we have reached a compromise and I think that’s the strength of our coalition,” he said.
The interesting thing for political observers is how that compromise was actually reached, and what effect it might have on other aspects of the coalition agreement — some of which are “die in a ditch” issues for the partner that is promoting them.
It also raises speculation as to what Seymour may have demanded and been given to make the compromise. 
Seymour made the point that if an extra tax was put on housing, it was the renter who paid much of the cost. He said the Government was reversing a “strange change” to taxation law made by the previous government.
Revenue Minister Simon Watts said that as a result of that policy, a number of landlords were not breaking even and had left the market — in some cases leaving houses vacant.
The narrative that landlords were villains, which had been used in the past, was simply not correct. The vast majority of residential property investors were “Ma and Pa” with potentially two properties, not people with multiple properties.
Opposition parties are saying there is no evidence that landlords will pass the savings on to tenants, and the Government cannot promise that either.
Labour’s finance spokeswoman Barbara Edmonds said this “tax advantage for the wealthy” meant the Government was shutting out first-home buyers, and renters would be worse off too. 
Green Party co-leader Marama Davidson said tenants bore the brunt of extra costs but did not benefit from the savings. 
Unfortunately record-high immigration is likely to place upward pressure on rents, as demand exceeds supply.
There are other issues to be ironed out in the coalition agreement — is this a template for the future?