There is concern that rents will rise after the government removes tax breaks for rental properties that are making a loss.

Statistics from Inland Revenue reveal 40 per cent of landlords have rental losses and the average tax benefit is $2000 a year.

Property Investors Federation executive officer, Andrew King, told Kate Hawkesby landlords will be forced to increase rents without these breaks.

"They try to get rent that will cover their expenses but a lot of the time housing in New Zealand is really expensive. It's expensive to buy your own home and it's expensive to buy a rental property."

"Without that loss it will cost tenants a lot more to actually get their accommodation."

"What people are going to have to do is either look to put their rents up or they will be forced to sell."

"Either way, you have higher rents or lower supply. Neither of them is what we want at the moment. We have a shortage of rental properties we actually need rental properties and we should be encouraging people to provide rental properties."

He said there are a number of costs associated with owning a rental property.

"A rental property provider is getting rental income and just like any business, they have to pay tax on any income they make. Deducting expenses just works out what the net amount of tax they have to pay is."

Research by the Property Investors Federation shows the cost of providing the average rental property is $10,900 a year.

"At the moment you can deduct that from tax from other income and that lowers the actual cash cost to about $6000."