Prime Minister Mark Carney wants to get the government back into the business of building homes. As part of his Liberal Party’s platform during last spring’s federal election, Carney promised to create a new Crown corporation to act as a real estate developer for affordable housing: Build Canada Homes. But recent experiences from New Zealand show precisely why Carney’s more government approach is exactly the wrong answer.
A study from the Montreal Economic Institute closely examines New Zealand’s experience in creating the KiwiBuild program, which was launched back in 2018. The goal of the New Zealand government was quite similar to the goal outlined by Carney: building more affordable homes. In New Zealand’s case, the specific goal was to build 100,000 new affordable housing units in a 10-year period.
The results? After six years of the program, the government’s strategy fell far short. After six years, just 2,389 new housing units had been built via KiwiBuild, whereas the goal by that time was to have built 64,000 new homes. As the MEI points out, at its current pace it would take the New Zealand government 436 years to achieve the goal it set out to meet within a decade.
As was inevitable, when the government changed hands in New Zealand, KiwiBuild was scrapped entirely due to its complete failure to generate real new housing and come anywhere close to meeting its stated goals.
Why did the program fail? Because government simply isn’t meant to serve the function of real estate developer. The private sector knows best. What needs to be done is tackle red tape, lower development charges, and let builders build. If there’s demand, and there is, the private sector will meet that demand. But not if the costs outweigh the benefits. And, right now, with stifling regulation and soaring municipal development charges, all too often the costs are outweighing the benefits.
What are some other lessons from New Zealand? Having governments pick numbers out of the sky, such as the goal of building 100,000 homes in 10 years, never works. The gap between the ambition of government to get a good soundbite and the reality on the ground was far too great. If the Carney government goes forward with Build Canada Homes, the feds should be clear eyed that the number of homes that get build through the program will likely be far less than what was promised during the election campaign.
Both the New Zealand government and the Carney government seem to have been oddly focused on what is known as prefabricated homes. The reality is that most buyers, even those looking for affordable homes, don’t want poorly constructed prefabricated homes. This was another failure in New Zealand, and one the Liberals seem obsessed with replicating. It would be a mistake for the government to put taxpayer dollars in the prefabricated homes basket.
Finally, those interested in buying KiwiBuild prefabricated homes often had a hard time getting a mortgage, as banks were hesitant to give people mortgages when the modular homes they wanted to live in weren’t built into the plot of land. This increased the risk of non-payment, which led banks to say no to financing.
All these failures in New Zealand are risks here. The Carney government wants a similar government program, funded by taxpayers, with unrealistic targets and an intent to build the kind of homes many people don’t want and are difficult to finance. Instead, the Carney government should reverse course and focus on predictable regulations and a lower tax burden to stimulate development from the private sector.
Jay Goldberg is the Canadian Affairs Manager at the Consumer Choice Center. He previously served as the Ontario Director at the Canadian Taxpayers Federation and a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.
