ACT says the Government is wasting money by subsidising the sale of state houses to first home buyers in the provinces.
About 400 vacant Housing New Zealand properties will be for sale over the next three years and buyers will be given up to $20,000 towards a deposit.
The sales will be spread over the regions from Northland to Southland.
ACT leader John Banks says the housing affordability crisis is the least pronounced in those areas.
He told Morning Report that smaller communities do not have a housing crisis and four state houses in Otorohanga will pay for one average section in Auckland.
Mr Banks said Auckland is where the real problem is, where land 2km inside the metropolitan area is seven times more expensive than land 2km outside the urban limit.
He said that is mostly caused by failings in the Resource Management Act legislation.
Earlier, Mr Banks said people struggling to buy a modest first home in Auckland and Christchurch will feel aggrieved those in much more affordable areas are being given a Government handout.
He said vacant state houses should be sold outright, with no subsidy.
Far North District Mayor Wayne Brown is not particularly enthusiastic about the scheme either.
While it's a good way to flog off dead stock, he says he does not expecting any boost to the region because of it.
Mr Brown says some Government department work could be done more cheaply in the regions and people would not then need subsidies to buy houses.
The policy comes into affect on 7 October.
Only those on no more than the average wage of $53,000, or a combined income of just over $80,000, who are buying their first home and will commit to living in the house for three years, will be eligible for the scheme.
Housing Minister Nick Smith says unused and unwanted houses in places like Otorohanga, Ohakune, Bluff, Gore, and Invercargill, will have an average market value of about $120,000.
