The all new Housing Ministry will cost a lot less than Treasury think it should.

The all-new Ministry of Housing and Urban Development has opened - with no fixed address, no permanent boss, and a bill much smaller than what Treasury advised was reasonable.

Housing Minister Phil Twyford announced the new ministry, known as either MHUD or HUD, in June and it launched on Monday.

MHUD is intended to take in most of the housing functions that were performed by teams within Treasury, the Ministry of Social Development, and the Ministry of Business Innovation and Employment - with its funding coming from those ministries' baselines.

Twyford said in June the Ministry would cost about $8m in its first year of operation, with all of that cash coming from the other ministries, which would be handing over responsibility to MHUD.

On Monday, he said that initial $8m amount had stayed the same, along with $6m of infrastructure costs - but this funding too would come from other ministries' existing funding.

But Treasury advice sent to Twyford in July warned much more money would likely be needed - another $30m of operating expenditure over the first four years of its operation, and a one-off boost of $6m from next year's Budget.

In the paper released to Stuff under the Official Information Act, Treasury officials advised that costs could not be so simply transferred over between agencies.

"The corporate costs of the pre-existing agency will not reduce proportionately to the reduction in their staff numbers," Treasury officials wrote.

"Two agencies have two sets of corporate functions, e.g. a Chief Executive, IT, or a core HR department."

Perhaps anticipating Twyford's attitude towards such a suggestion, officials provided options for what to do if the funding was not increased. These included reducing the establishment costs of the new ministry, scaling up its role more slowly, and allowing the other agencies to retain less funding when the functions were sent over.

That last option would "lead to a decrease in affected agencies' ability to deliver current outputs".

Twyford said Cabinet had decided the $14m in funding from other ministries would be adequate.

"Cabinet determined the final funding structure for the department. Cabinet decided that the predecessor ministries could absorb these costs," Twyford said.

It's understood staff in the agency are still mostly working at their older offices within other ministries, despite the MHUD officially "opening" on Monday.

Earthquake damage has resulted in a shortage of office real estate within Wellington.

There was no ribbon-cutting ceremony and very little fanfare from the Government, save for a solitary press release.

"Housing and urban development is too important to New Zealand, and too complex an area to remain split across government agencies," Twyford said in the release.

"We need one single, strong organisation to lead across agencies and across the housing and urban development system."

Land Information CE Andrew Crisp is the acting chief executive of MHUD but a permanent appointment process has begun.

MHUD will take in the KiwiBuild unit, responsibility for purchasing public housing, homelessness response, and most other housing policy-making.