'It's a fail': Government forced to buy KiwiBuild houses that weren't selling

For the first time, the Government has been forced to purchase KiwiBuild homes off a developer because the houses weren't selling.

The Housing Minister insists the homes will still be snapped up by KiwiBuild buyers.

Wanaka is famous for its bustling tourism, beautiful vistas - and now possibly a thorn in the Housing Minister's side.

The Northlake development promises 211 affordable KiwiBuild homes, which Phil Twyford says the area needs.

"There is really significant need in Queenstown Lakes District. It has the highest housing costs in the country."

But of the 10 homes put up for sale in October, half didn't sell in time - and the underwrite was triggered.

For the first time in KiwiBuild's short history, the Government had to purchase homes off the developer. Four of the homes are still unsold nearly six months after being balloted to first home buyers.

But Twyford says this is not a problem.

"We are not struggling to sell them. Those houses have only been completed for a few weeks so they are on the market."

However Judith Collins, National's housing spokesperson, says the Government has made a mistake.

"Too expensive, in the wrong place, not what people want - actually, it's a fail."

But Twyford is "pretty confident" the homes will sell to first-home buyers. Currently, all KiwiBuild homes are underwritten by the Government - taking the risk off developers, and making them more attractive for investment.

That includes all 211 homes contracted for Northlake.

Collins says it is a "welfare scheme for property developers".

While the houses are unsold, the Government will stump up the costs for maintenance like lawn-mowing and the cost of marketing them.