The scheme pays out grants of $5000 for an existing home, or $10,000 for a new build, to first-home buyers whose income is less than $95,000, or $150,000 as a household.
The contributions to new home owners are worth about $60 million a year - but the coalition is reviewing all housing support initiatives.
Housing Minister Chris Bishop says the coalition intends to review all of its housing products and funds, and on Tuesday morning could not commit to maintaining the existing level of support for first-home buyers.
"We now spend billions upon billions a year on housing support, and so we're having a good look at all of those programmes."
The government could be much more targeted and efficient with its support, and could not commit to maintaining the existing level of support for first-home buyers, he said.
"I can give them a guarantee that we are looking at all of the range of housing products that the government provides. We are taking a good, hard look at all of them. And once we've made a decision on them, I will make announcements about that."
By the afternoon his Cabinet colleague, New Zealand First's Shane Jones, had let slip the grants were on the chopping block, saying it was a matter being dealt with on Budget Day (May 30).
"All matters in the Budget will be dealt with on Budget night," Jones replied.
When asked whether that meant the grants would be abolished in the Budget, Jones paused, and then asked reporters to ask the first question again.
"Is the government scrapping first-home grants?" he was asked.
"No comment," he responded.
When National was in opposition in 2021 it criticised the Labour government for not paying out enough grants.
Like a social contract - Labour
Labour leader Chris Hipkins said the government talked of funding social housing, while criticising Labour's spending on the same.
The amount paid out in the first-home grants scheme was not a huge sum like "they're giving billions of dollars of tax cuts to landlords", he told RNZ's Morning Report programme today.
"Their priorities here are all wrong."
The tax deductions for landlords will cost the government $2.9 billion in lost revenue over the next four years.
Hipkins said it seemed like the government wanted "to smash the dream of home ownership for an entire generation of New Zealanders".
The grant helped Kiwis into their first home, he said: "They're paying their own mortgage and building up an asset for themselves."
Social housing also needed to be funded, Hipkins said.
"Of course we should put more money into social housing. It is ironic that the government are talking about channelling the $60 million into social housing when the billions that we put into social housing is being criticised."
The government would still have to financially support the community-based sector, he said.
"The last government under Bill English and John Key tried this and they found that actually the community-based sector needs government capital in order to build new houses. So the government would still be financially on the hook."
Labour's housing spokesperson Kieran McAnulty said scrapping the grants would be a cynical move.
"It will mean that there are people that would have been able to buy a home, and now they can't. There's sort of a social contract with people when you announce a plan to assist them to do something so crucial and so significant in their life like buy a home, that you don't fiddle with it."
McAnulty said the scheme, which was originally started by the previous National government, was a good idea, and Labour had expanded on it.
"It's extraordinary it took the loose lips of one minister to reveal what is going to be pretty catastrophic for so many first-home buyers that would have assumed the government would continue this scheme."
Removing the grants, while also restoring interest deductibility for landlords, would make things even harder for renters to get on the ladder, he believed.
