In his first major speech of the year, today in Auckland, he will attempt to set some clear direction after hints last October of major policy changes that had not been foreshadowed before the September election.
Housing New Zealand's stock of 68,000 tenancies is likely to lessen but Mr Key said it would remain the largest landlord for social housing.
Reform in the way social housing is delivered was a key feature of the 2013 Budget.
The Government's stated goal last term was for 20 per cent of the country's social housing to be provided by non-government organisations by 2017.
It has extended subsidies to approved social housing providers, which allows them to charge income-related rents (no more than 25 per cent of net income) for people with high needs in the same way that Housing New Zealand does.
It has also introduced reviewable tenancies to get away from any expectation that a state house is for life.
"We are taking these new approaches in social housing because we don't think the old system worked as well as it could do for tenants or indeed for taxpayers," Mr Key said yesterday after his first Cabinet meeting of the year.
Mr Key is today expected to outline ways for approved housing providers to increase their social housing stock.
"Our focus has been on getting a more diverse and fairer housing system that works better for tenants."
Labour housing spokesman Phil Twyford described what the Government was planning as a "voucher model" for social housing provision.
He said it should be thrown out and the Government should instead increase the stock of state housing and modernise existing houses.
He also wanted a large Government-backed building programme to assist with what he called "the housing crisis".
Such a programme would be for private ownership but Mr Twyford said "the dynamics of the market are such that it is the people [at] the bottom end of the market [who] are really adversely affected by the current shortage ..."
Mr Key said there was no housing "crisis" and the Government's policies were aimed at increasing supply.
