"The end result is going to make a fantastic home, it's bigger than just their education."
Mr Smith said "originally it [charity house] came about to provide a really good learning experience and a way for us as an organisation to be able to give back".
Last year's Charity House raised a record profit of $46,000 for local charity groups and he said they hoped to raise even more this year.
He also thanked tutors and supporters of the event, without whom he said the event "wouldn't be what it is".
"Long may it continue."
Joanne Donovan, Toi Ohomai programme area lead for interior design, said the institute was all about community, collaboration and innovation.
"The interior design department is extremely excited to be part of this project too," she said.
On completion the house will be auctioned, with proceeds going to charity groups around Rotorua.
Steve Lovegrove, co-owner of McDowell Professionals, will be auctioning the property.
"We run all of the marketing and auction campaign at the end of the project," he said.
"We've been involved for many years, and there's a responsibility that falls on our shoulders to get a rewarding sales result for the students."