Minister of Housing Phil Twyford says KiwiBuild is about trying to help people who have been locked out of the housing market, even if it's young, middle class couples.
Questions have been raised about eligibility for the scheme after a graduate doctor and a person who works in marketing became owners in the first finished KiwiBuild development, in Papakura.
To be eligible, individual purchasers can have a maximum income of $120,000 and couples can earn $180,000.
Mr Twyford told Morning Report the fact that young people, often couples with good jobs and two incomes, had been locked out of the housing market showed how bad the housing crisis had become.
"It's about trying to help the people who only a decade ago would have quite naturally expected they would have been able to own their own home but because of the massive yawning gap between incomes and house prices in Auckland, they're now locked out."
Mr Twyford "completely rejected" the criticism that $180,000 income cap for a couple was too high.
"The income group who earn between $80,000 and $180,000, they have had the biggest fall in home ownership of any other demographic group in the past 10 years."
Watch Phil Twyford respond to KiwiBuild criticism on Morning Report:
Also in the first group of buyers in the KiwiBuild homes in Papakura were a student, a warehouse worker, a concrete worker, nurses, a student and a stay-at-home mum - people who'd previously been locked out of the housing market.
"This is a slice of middle New Zealand and they've been locked out of the housing market in the last decade."
Mr Twyford said some of the criticism had been incredibly mean-spirited, especially from other politicians.
He said National MP Judith Collins posted on social media questioning if a young couple deserved a KiwiBuild home.
She retweeted a picture of the couple saying "204 countries - maybe doesn't need need taxpayer support".
The couple's original post appears to refer to a meme on finding a romantic partner rather than an actual number of countries visited.
Mr Twyford says it showed the "toxic culture" in the National Party was alive and well.
"I think for someone who wants to lead the National Party, that is a very, very strange way to behave."
He said the young couple had felt bullied.
Ms Collins is being approached for comment.
National Party leader Simon Bridges defended Ms Collins saying she was just highlighting problems with the policy.
"What that shows is that Phil Twyford is under a lot of pressure here.
"[Judith Collins] is pointing out really poor eligibility criteria.
"We've got a situation where this was meant to be for lower income New Zealanders who are struggling. It's just not."
Mr Twyford acknowledged criticism that KiwiBuild was not aimed at low-income families, but said those families simply would not be able to make repayments on a $300,000-$500,000 mortgage.
Mr Twyford said the government was building affordable homes, in the lower quartile of prices, and selling them to young families.
Prospective KiwiBuild owners also have to be first-home buyers or 'second chancers', intend to own the house for three years and live in it and be New Zealand citizens, permanent or ordinarily resident.