The number of State homes is likely to fall even as the Government increases the size of houses it owns in Auckland.
The Government is expected to reveal in the Budget on Thursday more details on its plans to have community organisations take greater responsibility for social housing.
On Tuesday, Housing Minister Nick Smith announced two initiatives aimed at providing more State house bedrooms at a cost of $377 million over two to three years.
The Government is to add 3000 bedrooms to existing houses and install 500 pre-fabricated homes on large Housing New Zealand properties. Dr Smith said there is a shortage of large homes - particularly in Auckland.
Some 2000 three-bedroom houses would be converted into four- and five-bedroom homes using modular units. The houses are up to 40 years old and on large enough sections to accommodate extensions yet still provide a decent outdoor area.
The second initiative would create an extra 500 two-bedroom State houses over the next two years on the sections of large Housing New Zealand properties in Auckland.
Dr Smith said the initiatives are part of the Government's agreement with the Auckland Council to increase the supply and affordability of housing.
However, Finance Minister Bill English concedes that the number of State homes might fall as community organisations provide more social housing.
Mr English would not release details until Thursday, but said community groups would get the same government subsidy as Housing New Zealand, if not more.
But Labour's housing spokesperson Phil Twyford is suspicious about the plan to have voluntary organisations provide more social housing and worries it will fail.
"The risk is that this is simply the National Government off-loading responsibility for State housing - something it's never really believed in. Off-loading that responsibility to a community sector that is fragile, embryonic, under-resourced and under-capitalised."
Budget to address housing affordability
Bill English said there would be more in the Budget on housing affordability, following on from an announcement last Friday to fast-track housing developments in Auckland.
The Budget would also confirm the push to have more non-government agencies providing housing, Mr English said.
Asked whether the changes would mean the Government would provide fewer State houses he said: "Possibly, but not fewer ... in fact I can't confirm whether there will be fewer State houses, but there will certainly be maintaining or increasing the number of people who can get access to the income-related rents."
Mr English also said there would be some new money to help reduce poverty.
While the Government opposes Mana leader Hone Harawira's member's bill to provide food in schools, it is possible some money might go towards feeding the most needy children, Radio New Zealand's political editor says.