The Crown has been forced to buy 12 unsold KiwiBuild homes worth millions of dollars, sparking National's Judith Collins to describe the scheme as "a potential financial black hole for the Government".
A KiwiBuild spokesman said that out of 79 homes completed so far, 12 "have been purchased through the underwrite" and he defended the scheme, saying it was "working as intended".
But Collins said the buybacks were not a good situation because all the homes built under the scheme should sell readily yet the Crown was being lumbered with expense through being forced to buy unsold homes all around New Zealand.
The underwrite scheme in the multi-billion dollar 100,000-home plan involves the Crown fulfilling its promise to buy homes at a discounted rate from the builder if they did not sell within a certain timeframe.
Newstalk ZB's Mike Hosking has said of the buyback: "That's you and me buying houses we don't need, because the whole concept of KiwiBuild was a cock-up from day one. Why aren't these homes selling in a housing crisis? Well, because there wasn't and isn't a housing crisis. That is a political term invented by Labour when in opposition for cheap points."
Collins said today the number of buybacks which had been exercised was a potentially dangerous situation financially.
"This is a potential financial black hole for the Government - buying houses that people don't want at prices they don't want. A buy-in guarantee or underwrite can be triggered at 60 days on the market," Collins said today.
The 12 homes are understood to be in Auckland, Christchurch and Northlake in Wanaka but the KiwiBuild spokesman did not specify where they were.
In February, the Herald reported how six new affordable KiwiBuild houses in the expensive Wanaka market remained unsold despite being marketed since October for just $565,000 to $635,000 each, around $100,000 cheaper than other similar places in the same area.
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KiwiBuild says it "provides incentives for property developers to build more affordable homes, faster. The incentives are provided in a number of ways, including reducing risk for developers by underwriting homes in new developments, making land available for development, integrating affordable housing into major urban development projects."
A KiwiBuild spokesman said: "Twelve homes have been purchased through the underwrite, one of which has since been sold to a KiwiBuild buyer, in comparison to 79 homes sold to KiwiBuild buyers.
"The underwrite is working as intended, enabling affordable home building by acting as a backstop buyer. This guarantee enables developers to get funding to build the homes quicker, without having to wait for presales and means that they can release their capital quickly after completion, so they can get on and build more affordable homes," he said.
"Overall, the median time KiwiBuild homes take to sell is the same as non-KiwiBuild homes. But that varies between homes that sell in a few days, like half the homes in Tauranga, and those that take longer," he said.
"Without a KiwiBuild underwrite, developers couldn't get building as quickly and would be left holding any unsold homes on their books, slowing their ability to build more homes. The underwrite helps to remove the stop-start nature of construction (a significant driver of cost), and incentivises developers to provide more of the more affordable homes we know are needed," the KiwiBuild spokesman said.
James Wilson, valuation and innovation director for Valocity, said the 12 buybacks highlighted the importance of building the right home in the right place.
"Get this balance wrong and demand from the intended buyers of Kiwibuild homes falls away. Get this right, such as the recent development announced in Omokoroa, and Kiwibuild can have the desired effect of assisting first home buyers into the market," he said.