Labour leader Andrew Little says Labour will phase out tax breaks for landlords and property investors in a bid to dampen property speculation and help first home buyers go up against property investors.

Little unveiled the latest plank in Labour's housing policy at the party's election year Congress in Wellington today.

• Ring-fence losses on rental properties so they can no longer be used for tax breaks on other income. It will mean losses can only be applied to income from housing.
• Use the estimated $150 million in increased taxes for $2000 grants toward insulation and heating.
• Negative gearing will be phased out over five years.

Little said in the past year, property speculators had escaped having to pay $150 million in taxes.

The tax breaks benefited property speculators and those on high incomes and were heavily used by foreign buyers.

"This will create a level playing field for home buyers and help families get a fair shot at buying a place of their own."

He said both the International Monetary Fund and the Reserve Bank had recommended removing the tax breaks.

Last year, the IMF said ring fencing tax losses on housing investments would weaken a significant price driver in real estate.

Negative gearing means that if the if the cost of  a rental property in mortgage interest, maintenance, water, and rates are more than the income from rent, the owner can get a tax deduction on the loss. It is seen as an incentive to invest in housing.

The Property Investors Federation has opposed removing that incentive, saying it could result in a shortfall in rental housing stock.