Documents obtained under the Official Information Act showed the social housing agency spent more than $238,000 on due diligence on the 656-658 Princes St site, which presently acts as the bus depot for Go Bus.
The agency planned to build a social housing complex on the site with 80-100 residential units, consisting of a mix of one-bed (three-storey apartments) and two- and three-bed "terraced family homes".
About 70 carparks would have been provided for the development.
Kainga Ora regional director Kerrie Young said the site offered a desirable location for much-needed housing in the city fringe area.
"We drafted a number of development plans for housing on the site.
‘However, taking into account land and build costs, the project was not financially viable for us."
Kainga Ora contracted Tonkin & Taylor for the assessment work. It said in a report "the long industrial history of the site, coupled with different activities that are or have occurred across the site, means that it is possible that higher levels of contamination may exist outside of the areas presently investigated".
The firm recommended Kainga Ora investigate for the presence of soil contamination across the site associated with the historical land use.
"Given the extended industrial history, and variety of activities/industries that have operated on the site, some form of soil contamination is considered likely to be present across the site."
The presence of soil contamination, particularly asbestos, could have had significant development implications "due to increased disposal costs and the need to implement contaminant-related health and safety and environmental controls", the report said.
Due diligence began in early 2021, and in May this year, Kainga Ora confirmed it was no longer interested in the site for development.
Chemical and fuel storage was known to have occurred on the site over many years, the report said.
"Owing to the relatively shallow depth of groundwater, dewatering may be required depending on any future building foundation requirements on the site."
Dewatering and discharging off site could require extensive consenting and long-term management, the report said.
Asbestos was also detected in the soil, while lead was "detected above high-density residential land use criteria in two individual soil samples".
There were also other concerns surrounding mitigation and changing the land-use, which would have included decommissioning of the existing AST fuel storage system, and an assessment of what residual contamination might have been left behind after removal.
"Additional investigation is likely to be required after the removal of the fuel storage system, as well as after the demolition of existing buildings at the site in order to confirm the initial assumptions of this investigation."
