The Salvation Army says it felt pressured into carrying out expensive, time-consuming research on buying unwanted state houses because the Government repeatedly referred to the charity as a likely buyer.
The organisation announced yesterday it would not take part in the Government's plan to sell up to 8000 state houses to community providers after research showed it would stretch its resources too far.
It would consider joining forces with other providers to buy some of the state houses, but it would not take them on alone.
Since unveiling the policy in January, Prime Minister John Key and Finance Minister Bill English have cited the Salvation Army on several occasions as an organisation which would be interested in taking over some of Housing New Zealand's stock.
But Major Campbell Roberts, founder and director of the Salvation Army's social policy research and parliamentary affairs unit, said the charity was a reluctant role model for the policy. He said the ministers' comments made the Salvation Army feel forced into researching a larger role in social housing.
"It's been a problem," Major Roberts said. "We had so much profile in the media about doing this when in fact all we'd done is say it's something we'd look at in due time. Next thing, we found ourselves as the most likely people to be undertaking social housing."
Referring to the research, he said: "It's cost us a lot of money to do it, frankly. And if we spend a lot of money on something like this, we don't spend it on other things."
The Salvation Army's study has not been released, but Major Roberts said it showed that the costs of taking on the state houses had been hugely underestimated.
For the scheme to work, the properties would have to be sold at a discount of 25 per cent in lower-demand areas and up to 75 per cent in areas where housing was more limited.
Major Roberts said that "even at those [discount] levels, we face not having a cash surplus for over a decade".
This was because of the cost of maintaining the state houses, providing extra services to tenants, and employing specialists who could help manage a multi-million-dollar housing stock.
Community Housing Aotearoa director Scott Figenshow, whose organisation represented 74 housing providers, said the Salvation Army's decision was not surprising because of the $1.2 billion of maintenance required on HNZ's stock.
Mr Figenshow said providers were interested in forming a housing consortium which combined financial resources and skill sets, but they would need greater certainty about long-term funding from Government.
Other providers said they remained committed to taking part in the Government's sell-off.