The Reserve Bank is targeting property investors with possible new lending restrictions.
The central bank said loans for investment properties were riskier than residential home loans, and it wanted lenders to clearly separate them.
The Reserve Bank said what was an investment property needed to be clearly defined so that it could ensure lenders held a big enough cash buffer against the risks.
But the Property Investors' Association said making a bank hold more capital against such loans could push up the cost of borrowing, as well as rents.
Andrew King from the Association said tightening rental lending rules would push up borrowing costs and ultimately increase rents, costing tenants.
"We don't think there is any extra risk and therefore there shouldn't be that extra cost applied, because it's only going to hurt rental properties and their tenants."
Mr King said the housing market was not going to differentiate between owner occupied and rental properties, and the prices of both would rise or fall equally.
Auckland professional property investor David Whitburn said he agreed in principle with the bank's idea that mortgages should not be over-reliant on rental income.
"There are a number of investors that are too rent-reliant as well. We've just got to be careful for some retired persons that are property investors - we've got to be careful that we're not too tough on the rules because otherwise we run the risk of tenants not being looked after properly because there would be a number of landlords that would exit."
Mr Whitburn said if landlords move out of the rental property market, rents will continue to increase.
Massey University Centre for Banking Studies director David Tripe said the move would give banks a bigger cushion against loans going sour.
But he doesn't think tighter requirements will drive landlords out of the market.
"If it's an extremely marginal decision for somebody to invest in residential property, they may decide that they shouldn't do so but it's going to be, I suspect, a relatively small effect.
"It'll be a relatively small proportion of potential property investors that are deterred by this."