Failed New Zealand scheme is cautionary tale for Carney's homebuilding agency: report

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a day ago

OTTAWA — Researchers with the Montreal Economic Institute say Canada's new federal homebuilding agency is likely to overpromise and underdeliver, drawing a cautionary tale from down under.
The free-market think tank argues in a new study that New Zealand's now-defunct homebuilding scheme KiwiBuild, a signature policy of Jacinda Ardern's Labour government, shows why government bureaucrats shouldn't try to play real estate developer.
'New Zealand's experience highlights the limits of government intervention in the real estate market, especially in terms of resource allocation,' write co-authors Gabriel Giguère, Yassine Benabid and Renaud Brossard.
Brossard told the National Post he was struck by the similarities between KiwiBuild and the Liberal government's Build Canada Homes.
'If you look at government programs that have been done throughout the world, this is probably the closest thing to what (Prime Minister) Mark Carney's pitching,' said Brossard.
KiwiBuild launched in 2018 with the lofty goal of building 100,000 affordable housing units in a decade. It would never come anywhere near meeting this target, completing just 2,389 units by the end of its last full year of activity in 2024.
The program was slammed by both politicians and pundits as a 'complete disaster', contributing to Ardern's fall from global progressive darling to her abrupt resignation in early 2023.
By one estimate, KiwiBuild would have taken 436 years to hit the original target of 100,000 homes.
Brossard said that one critical mistake that KiwiBuild administrators made was relying too heavily on prefabricated homes.
'In some of the areas where they were hoping to build homes for (KiwiBuild), they found that shipping in a prefab home was actually more expensive than just building one in situ,' said Brossard.
Carney has promised billions in subsidies to prefabricated and modular home builders, as part of his plan to double the rate of housing construction and build 500,000 new homes a year within a decade.
Brossard and his co-authors report that KiwiBuild's prefab homes were often inferior to other housing options available to low and moderate-income families.
Some banks were even hesitant to approve mortgages for the prefab homes, given the 'flight risk' involved where delinquents could theoretically load the units onto a truck bed and skip town.
Brossard says that the big lesson from KiwiBuild is that civil servants should leave the nuts and bolts of real estate development to the professionals.
'This is what tends to happen with top-down government programs that push one-size-fits-all solutions,' said Brossard.
The study recommends that Carney scrap Build Canada Homes and instead focus on creating a friendlier regulatory environment for private real estate developers.
Brossard also said that policymakers can stimulate homebuilders by harmonizing professional qualifications for workers in the building trades across provinces and territories.
The office of federal Housing Minister Gregor Robertson didn't respond when asked about KiwiBuild by the National Post.
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