The Auckland housing crisis has boxed many Kiwis out of the market completely.

The failing housing market is leading to stark inequality between the old and young and the rich and the poor, officials told the new Government as they took office.

This inequality is harming the health of Kiwis, the country's productivity, and the Government books.

The briefings for incoming Housing Minister Phil Twyford show a 45,000 home gap in Auckland, as was previously reported by Stuff. Twyford maintains the previous Government intentionally kept the number secret.

Officials over two of the briefings on housing do not mince words, blaming high house prices for widening inequality.

READ MORE: 'We've inherited a disaster': Official figures show 45,000 home shortfall in Auckland

"High levels of immigration and fewer departing New Zealanders, along with natural population growth has seen demand for housing outstrip supply," they write, pinpointing the start of this trend to 2003.

Both rents and house prices have risen far faster than incomes.

"High house prices have stark distributional impacts: they transfer wealth from younger and less wealthy people to existing landowners, who are generally richer and older. The substantial increase in house prices over past decades appears to be the major cause of the observed increase in wealth inequality in developed economies, and the ongoing effect is one of restricting access to opportunity for the young and less well off.

"This flows into wider social costs, including overcrowding and homelessness, health problems, and poor educational and labour market outcomes."

Officials note that high house prices also cause a significant drag on productivity and increase government costs.

Even though the market in Auckland was flat to falling, this didn't necessarily mean things were getting better.

"Although affordability improves, falling house prices reduce the supply of new homes. They undermine the commercial viability of residential development, because developers and their financiers can have less confidence of recouping their investment," officials note.

Just over half of potential first home buyers across the country would have to spend more than 30 per cent of their income on servicing the mortgage of a modestly priced home, a rough barometer for housing unaffordability. Over two thirds (68 per cent) of potential buyers in Auckland face the same predicament, and close to a third of renters are already spending that much just on rent.

Home ownership rates had fallen from a high of 74 per cent in 1991 to 63 per cent in 2013, but the total amount borrowed for houses was at levels higher than prior to the GFC.

The officials also noted that in general owner-occupied homes were in a better state of repair than rentals, and the current social housing pipeline would fail to meet demand in coming years.

WHAT'S TO BLAME

Officials blame the planning system, availability of land, infrastructure provisioning, a lack of finance, and a too-small construction sector for the "fundamental challenge".

They recommend a suite of long term changes to the urban planning systems, a ramp up of land acquisitions, and endorse Labour's "KiwiBuild Visa" policy to get more construction workers into New Zealand.

It is noted that getting workers into Auckland itself may be hard thanks to "regional market stickiness" and, ironically, high housing costs.

Officials are less enamoured with with demand side measures like tax changes and banning overseas buyers, noting that interventions on the demand side are "generally less impactful than supply measures," but acknowledging they can help.

The new Government has already moved to ban foreign buyers of all existing homes.

Officials also note that New Zealand is hardly unique in having this problem, with home ownership rates Australia and Europe also below 70 per cent.

And the disparities aren't just between Auckland and the rest of New Zealand: just 42 per cent of Māori own their own home, compared to 63 per cent of all Kiwis.

NO REGRETS - SMITH

Former Housing Minister Nick Smith told media he had no regrets over his Government's handling of housing, and said every estimate was different.

"What we do know is that in my period as Minister we grew the number of houses being built in New Zealand from 14,000 per year to 31,000 per year," Smith said.

"I think you've got a new Government that is trying to make it look as bad as possible."

"I'll be watching with a great deal of interest as to whether the Government can get a faster rate of growth in new house construction."

He did not accept housing was a major driver of poverty or inequality.

"What I do note is that interest rates halved," Smith said.

"I also note that in a city like Christchurch rents have been dropping."

Smith is no longer the Housing spokesman. He said it was "unusual" that officials had prepared a BIM specifically around the new Government's policies.

Twyford said his Government had "inherited a mess."

"What the Government officials told us when the coalition government took office is that there's a housing crisis, and it's having huge social and economic effects," Twyford said.

"This is a social and economic disaster for the country. It is going to require bold reform from a number of fronts"