The Government intends to sell 1000 to 2000 state houses in the next year or so, and is not ruling out further sales in the future, Prime Minister John Key says.
In his State of the Nation speech in Auckland, Mr Key has outlined the Government's plan for social housing.
"It's why we talk about 'social housing' rather than 'state housing', because you no longer have to live in a state house to get a high level of government housing support. It's an important change."
Mr Key said the plan was to make more use of community housing providers by selling Housing New Zealand stock, and increasing the number of income-related rent subsidies.
The Government might consider more state housing sales during the course of this parliamentary term, depending on how that approach worked, he said .
"Community housing providers already own about 5000 houses and some are long established.
"There's a lot of potential there."
The Government wanted to have more social housing available in Auckland and Christchurch in particular, Mr Key said.
Properties would have to stay as part of the wider social housing stock unless the Government agreed otherwise, and existing tenants would be able to stay in those houses as long as they needed to.
He warned the Housing New Zealand stock being sold might not make the Government as much money as if they were sold as private homes or rentals.
"So we might not get the book value of the properties. But that's only because, under accounting rules, the value of houses in the Government's books is based on a theoretical sale in the open market. And that's not what we're doing."
Social house subsidies would be boosted from 62,000 places to about 65,000 by 2018, at an estimated cost of about $40 million more each year.
As part of that overall increase, an initial 300 income-related rent subsidies would be offered to community housing providers in Auckland.
Mr Key said about 3300 tenants were living in Housing New Zealand properties but were earning too much to get an income-related rent subsidy, and in many cases could go into private accommodation.
An additional 3000 tenancy reviews would therefore be held during the next two years, focusing on market renters and those who were close to paying market rents.
People would be "encouraged and supported" to move into other housing if they were in a position to so do, he said.
A $500,000 cash injection would be available for emergency housing, alongside a wider review of funding, and an Auckland emergency housing database would also be created.
As well, the Government would commission a strategic review of Housing New Zealand in the first half of this year, which would include its asset management plans.