Newshub can reveal KiwiBuild has just become a much better investment.

The Housing Minister has quietly softened up the penalties applied to buyers who flip their home.

Documents obtained by Newshub show owners will no longer have to give up all capital gain they make on the house if they sell it within three years.

Dave Dobbyn played his hit 'Welcome Home' to celebrate KiwiBuild on October 27, as part of festivities that cost the taxpayer almost $8000.

Dobbyn's performance didn't actually cost a cent, as he played for free - not that ACT leader David Seymour knew that.

"They're using taxpayer money to pay for Dave Dobbyn, and also to promote Labour Party policy," he told Newshub.

But there's something bigger to cry foul at: Phil Twyford has secretly backed down on penalties for KiwiBuild buyers who sell up.

When Labour announced the policy in 2016, its plan to stop buyers reaping windfall gains was they must not on-sell their home for five years - or else they had to hand all the money they made to the Government.

That's now changed to if buyers sell within three years, they must give up 30 percent of their profit.

"We really tried to strike the right balance here," Mr Twyford says.

"We don't want people cashing in on a potential windfall gain - but on the other hand, these houses are not subsidised. People are paying for them with their own hard-earned cash."

Mr Seymour's not impressed.

"Hock it off after three years, keep 70 percent of the gain. This has always been a flaw in their policy."

There is big money to be made. Based on the last three years, the average price of a home in Papakura has risen from $569,000 to nearly $700,000, meaning house owners could have made $130,000 in the last three years.

That means even after the 30 percent penalty applied by the Government, they'd still pocket more than $90,000.

Mr Twyford says we'll have to "wait and see" if 30 percent is really much of a penalty when there are those windfall gains to be made.

"The entire windfall gain would've been a bit draconian," he says.

But it's draconian policy he came up with in 2016.

"At that time we were operating in an environment, a very different housing market," is his defence.

This is not the first KiwiBuild backdown we've seen. Since being in Government, Mr Twyford has changed the price caps, the eligibility criteria and now this - a change which has the potential to leave KiwiBuild open for abuse.

Newshub.