The law says that 51% of a kit plane "must not" be factory built but it doesn't say the owner has to do it.
Negative, the law (as interpreted in CAP 733 in the UK, EASA Annex II in Europe, and somewhere else for the US) is quite clear on the fact that 51%+ of the construction must be done by the owner.
I hate the phrase "kitplane". It gives me the impression of poorly finished fibreglass edges, badly fitting canopies and bolts that work their way loose really easily.
Then don't use it, the legal term in the UK is "amateur built", and in the US is "experimental".
Personally I do think the current situation is not good, but not necessarily for the reasons others have said. There are people out there building aircraft kits to order - in some cases they are BMAA or PFA inspectors who are also signing their own work off - a very poor state of affairs.
The fact is that "cottage building", like prostitution - inevitably goes on and is impossible to stamp out. So, the powers that be really should be regulating it and keeping it under proper control - I've heard several proposals to do so over the years but each has been shot down in flames by various vested interests. Shortsighted in my opinion, because those vested interests were probably best placed to make money from any such scheme.
G