Megan Woods explains the 'quantum shift' in KiwiBuild

The Opposition's been criticising KiwiBuild's lack of progress for two years, but Housing Minister Megan Woods on Thursday said she's the first to admit the ambitious scheme hasn't worked.

Only 258 homes have been completed so far, but another 1546 are contracted and more than 8000 committed. Hundreds of them built in places few first-home buyers want to live - such as Te Kauwhata and Wanaka - will be sold on the open market, Dr Woods saying it was a "mistake" they were built in the first place.

"One of the things that has got us into this bind is that we've had targets that have driven perverse outcomes," she told The AM Show on Thursday. 

"Targets are good when they're actually adding to a policy. But when I lift the hood and look at a policy and see that a target is actually pushing a policy in a direction other than where it should be going, I am going to call time on it."

The main target - 100,000 new homes in 10 years - has been dropped, despite Deputy Prime Minister Winston Peters as recently as May calling it "easily achievable"

Dr Woods replaced Phil Twyford earlier this year, tasked with fixing the scheme first introduced by then-Labour leader David Shearer in 2012.

"We've seen some of the things we committed to at the last election and that we've delivered on are starting to make a difference. But we're the first to put up our hands and say KiwiBuild hasn't worked the way that we needed or wanted it to."

National housing spokesperson Judith Collins would disagree, having been a strident critic of the scheme since its inception.

"It's a total failure," she said on Wednesday. "I'm happy to give advice to the Government on this at any stage. They've ignored everything I've said to them in the past."

Her first suggestion would be to relax planning rules, but instead the Government's gone with making it easier for people to get deposits together, by letting groups of adults combine their First Home Grants (formerly HomeStart grants) and reducing the amount needed for a deposit to 5 percent. Dr Woods brushed off suggestions this would see people buy homes they couldn't afford, particularly if interest rates rise.

"If someone can't afford the mortgage then a bank won't be granting them a mortgage. These are still subject to normal lending criteria."

The really big change Dr Woods says will be the new shared equity scheme, which will see the Government pump $40 million into getting at least 2500 families into their own homes.

"If you consider the Housing Foundation's done 400 over 10 years, this is a huge quantum shift," she told The AM Show. It's not clear if she's aware 'quantum' is usually a word used to describe things that are incredibly small.

And in another tweak to the KiwiBuild scheme, they might not necessarily be new houses.

"In some parts of the country, it will make more sense that the more affordable option will be existing housing stock. If you're in a part of New Zealand that doesn't have a shortage of housing, why would we roll into town and unnecessarily build new ones?" 

First Home Grants can now be spent on homes of any value. Dr Woods didn't reject The AM Show host Duncan Garner's suggestion that would drive prices up by giving potential buyers more options.

"We think it is our responsibility as a Government to make sure that we are increasing opportunities for home ownership for people."

Home ownership rates in New Zealand have been falling since the early 1990s. It peaked in 1991 at almost 74 percent, but is now more than 10 percent lower. Dr Woods says it's no coincidence the tide turned in 1991.

"That's when the state stopped being active in helping people into home ownership, which had been there for over 100 years."