Labour leader Andrew Little says the Government's plan for social housing is about looking after National's "private developer mates" rather than fixing the country's housing problem.

Prime Minister John Key today confirmed the Government planned to sell 1000 to 2000 state houses in the next year to community-housing providers, with with more sales possible in coming years.

OPINION: Key opts for state of state houses over state of the nation

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In his state of the nation speech today Key said Housing New Zealand would still remain the biggest provider of social housing with at least 60,000 properties by 2017, compared to 68,000 now.

Income-related rent subsidies would also be opened up to non-Housing NZ homes, Key said.

The Government would review another 3000 existing tenants over the next two years to see if they could be moved out of state houses and into their own homes or private rentals. That would take the number of reviews to 5000.

However, Little said boosting subsidies for state house tenants to move into the private rental market would push up prices, affecting all renters.

"The hidden story in all this is this is about the National Government looking after their private developer mates then putting pressure on the rental market and pushing rents up," he said.

"This is what this is about - that's what it'll do and it'll affect all renters."

The country's lack of affordable housing could only be fixed by building more houses, Little said.

He described the Government's latest plan as "just another sell-off".

National's plans to decrease its state housing stock signalled a shift from being there to support the "most vulnerable" to handing over the responsibility to private providers, Little said.

"It's actually not a long-term solution."

In the past, private landlords were unable to look after those in need of state housing, he said.

"You're just setting yourselves up for the same mistake again."

Community-housing providers were not equipped to pick up the state houses that would be sold off and offer a "highly-sophisticated, complex" housing rental system.

They were not geared up to be a mass provider of housing across the country like Housing NZ was.

Little said state housing was a "significant issue" and the Government should have made its plans public during the election campaign.

National's plans to review a further 3000 tenants put stress and pressure on tenants who were elderly or in difficult circumstances, Little said.

"It's a pretty cruel way to go. It doesn't fix the problem."

BUSY THREE YEARS

Key told the lunchtime meeting arranged by Rotary at Auckland's Stamford Hotel, that the country was in good shape and getting better, and the Government was working towards a surplus and repaying debt.

The country had endorsed the Government's approach four months ago by re-electing it with a stronger mandate, he said.

The prime minister said there would be no slackening in the pace with three busy years ahead, as the Government managed the challenges from global risks and events.

The priorities this year would be responsibly managing the Government's books, building a productive and competitive economy, delivering better public services, and continuing to support the Christchurch rebuild.

On housing, he outlined measures to boost home building in Auckland including changes to the Resource Management Act.

Incomes were rising faster than inflation and interest rates were low, but it was hard to save for a first home and the Government would kick off its Homestart programme in April to help an estimated 90,000 people over five years.

Housing subsidies cost $1.9 billion a year, he said, with about $1.2b of that going on the accommodation supplement, and the other $700m going to the income-related rent subsidy that was being opened up to non-Housing NZ homes.

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Key said there was a lot of potential for other providers of social housing and the Government wanted that number to grow with the aim of more people getting into social housing over the next three years.

The 62,000 subsidies now available would rise to 65,000 by 2018 at a cost of another $40 million.

The Government also wanted to accelerate plans to ensure Housing NZ had the right location and right-sized houses to suit those who wanted them.

Housing NZ would be reviewed this year to ensure its properties were right for tenants.

The Government would also accelerate development of Housing NZ land, but it was still considering how and where that would happen.

To encourage more community social housing it would sell the 1000-2000 Housing NZ homes using "an open and competitive process" that would be used for social housing.

"We are looking to get a fair and reasonable price for these properties, bearing in mind they're being sold as ongoing houses with high-need tenants" Key said.

But they were not being sold as private homes or rentals so they might not achieve book value.

The freed-up capital would be used for housing "and other capital projects needed across Government", Key said.