Housing Minister Chris Bishop says the total number of social houses will not reduce under the government's Kāinga Ora turnaround plan.
The strategy - endorsed by Cabinet and revealed on Tuesday - refocused the government's housing agency and set out a net increase of about 400 homes a year.
That would be achieved through about 1500 new homes and 400 retrofits annually, offset by about 800 sales and 700 demolitions.
Bishop said the plan had five major components:
• Kāinga Ora to be refocused on its core mission: building, maintaining and managing quality social housing, and being a supportive, but firm landlord.
• Improved tenant and community management.
• Improved housing portfolio and build management - better managing the existing Kāinga Ora assets and building or renewing homes as efficiently as the market, including simplifying social housing building specifications and using all available building delivery channels.
• Improved organisational performance: a focus on cost effectiveness - reducing high overheads and leveraging buying power more effectively.
• A more persistent and sustainable approach to funding and associated settings.
"Kāinga Ora sales will focus on older properties in high value areas, with the proceeds going to provide multiple other units in different areas," Bishop said.
"The sales programme will also focus on houses which are not fit for purpose, where the typology is ill-suited to the particular area, or which are simply uneconomic to maintain or redevelop."
He said Kāinga Ora should be building or acquiring "simple, functional warm and dry houses, as quickly and efficiently as possible".
This would mean bringing construction costs down from the current estimate of 12 percent above market rates to "fully allocated costs that are in line with, or better than, market rates".
The scope of the agency would also be reduced, with the Ministry of Housing and Urban Development taking over its remaining underwriting activities; and his new National Infrastructure Agency taking over the Infrastructure Acceleration Fund.
The Kāinga Ora Land Programme would be wound down, and changes to other settings would also be made through amendments to the law being progressed this year.
"Despite rhetoric from Labour in the past, divestment of properties in order to manage stock is a routine approach to Kāinga Ora's operations. In the past five years they have sold, demolished or ended the lease on more than five thousand properties as part of their normal stock renewal process. The plan allows them to do more of this so the old, unfit housing stock can be renewed more quickly.
"The plan will refocus Kāinga Ora on its core purpose of being a good social landlord and improve operating performance and reduce losses, with debt capped at an acceptable level."
Bishop said the plan would reduce Kāinga Ora's deficits by about $190 million this financial year, while the 2027/28 deficit would be reduced by $354m compared to pre-election estimates.
It would reduce the agency's debt by about $1.8b compared to the pre-election figures.
The plan was developed after a review of the agency led by former prime minister Bill English found Kāinga Ora was under-performing and would not be financially sustainable without making savings and financing changes.
"The review made it clear that Kāinga Ora was in considerable financial strife. The government appointed a refreshed board and asked them to deliver a turnaround plan by the end of 2024 to return the agency to financial sustainability," Bishop said.