Kiwibuild Shows Socialism at Its Worst

Kiwibuild was always a disaster waiting to happen. It was clear in the 2017 election campaign that Labour had no understanding of the issues affecting the home building industry, and in fact they, and their buddies the Greens, were a big part of the problem, constantly voting against proposed changes to the RMA. They came into power with no idea of how they would be able to deliver on the promises that they had made, and of course, as we now know, they have already given up.

Kiwibuild was, however, an unusual project for a government, because private housing is normally the domain of the private sector. Until now, governments have been responsible for state housing, but not private housing. That they have decided to try to get into private housing is a first for a New Zealand government but not, it would seem, for socialist governments.

Isn’t it a fact that socialist governments have to control everything? It is just that they haven’t tried to control the private housing market up until now.

The good news is that they probably won’t try again in a hurry.

KiwiBuild has been widely recognised as a high-profile failure. According to the goals set by Labour when its policy was sold to voters, we should have 1000 homes built by the end of the month. At the time of writing, there are still almost 900 to go.
But although the programme may be a failure for the Government delivering on promises, it can still be a success as a lesson in the difficulties of economic planning. That is to say, it is a useful illustration of the problems with socialism.

For a policy to properly be called a socialist one then, according to one definition, two things really need to be present.
First, it needs to involve the state supplying goods or services otherwise or usually expected to be supplied through the private sector. What this means is when the state lays down roads, sets up street lighting and maintains a national defence force, it’s not engaging in socialism because those are things that can’t easily be provided through private business.

Secondly, for a policy to be considered socialist, it needs to involve an element of central planning. In a market economy, outcomes are the result of hundreds of thousands of daily transactions that balance people’s personal wants and needs against each other. Nobody is really in control, which is kind of the point. Socialism, on the other hand, is much more focused on controlled outcomes, which pre-supposes a controlling entity – usually the state.

I would argue otherwise. Kiwibuild properties eventually end up owned by the buyer, with no state intervention. Kiwibuild was never about the state providing private housing.

Secondly, the basic theory behind KiwiBuild is that, actually, private sector providers know less about what they were doing than the Labour Party policy unit does. To co-ordinate all the houses the state was now going to be in the business of building, or underwriting, the project was assigned to the newly renamed Ministry for Housing and Urban Development. So this scheme for the provision of private residences is also under political and bureaucratic control.

So it’s not surprising to see all the usual difficulties with socialism present themselves. As is typical with centrally planning, the word “mismatch” comes to mind. There isn’t enough land in the right areas, for example, so KiwiBuild has erected houses in places where nobody wants to buy them.

Socialists never really understand the private market. They think they can just regulate their way out of everything, but when a buyer has to spend the next 30 years paying a mortgage for a house that the government originally controlled, things often don’t end well. Hence the Kiwibuild disaster.

The policy is meant to help first-home buyers, but the prices have generally been set at a level that’s out of reach for that segment of the market. The programme is ambitious, but the construction sector doesn’t have the capacity required.

As the wheels started to come off, blame was directed at local construction firms for not getting with the Government’s preferred new business model. When reading that, my mind turned to the USSR’s grain crisis in 1928, caused by poor agricultural policy. Joseph Stalin concluded peasant small-holdings were too small and set about amalgamating them into collective farms that were even worse.


I doubt if things are quite that bad in New Zealand in 2019, but remember, when socialists try to solve problems, they tend to do it with state ownership or intervention. We don’t want state intervention in private housing. Fortunately, with the collapse of Kiwibuild, that is not going to happen anytime soon. Let us be grateful for small mercies.