Labour leader Andrew Little says Housing NZ should become a ministry and focus on helping people, not paying the government millions in dividends.

Housing New Zealand is being used as a "cash cow" and should not have to pay tens of millions of dollars in dividends to the Government each year, Labour leader Andrew Little says.

At Labour's centennial conference in Wellington, Little announced his party would abolish the requirement for Housing NZ to pay a dividend to the Government each year, changing from a corporation to a ministry to focus solely on providing enough state houses.

Little also said his party would build at least 1000 new state houses each year until there were enough to meet demand, while it would halt the Government's sell-off of existing state houses.

ANDY JACKSON/FAIRFAX NZ Labour leader Andrew Little says Housing NZ should not have to pay a dividend back to the Government.

Last September, it was revealed Housing NZ would pay the Government a $118 million dividend for the 2015/16 financial year - the largest in five years.

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Little said the Government was using the state house provider as a "cash cow", when it should be focused on helping people in need.

"At the moment, the way it's set up, the way it's operating, it seems to see itself as just a glorified property manager."

Changing Housing NZ into a public service, rather than a corporation, would give the organisation more money to ensure existing state houses were warm and dry, while building more houses to meet demand.

"We'll take away the incentives in the structure and say your job, you're a government ministry, you go and look after the most vulnerable to provide them housing, which is what the Labour government did 80 years ago."

Frontline staff cut by the Government would be brought back, while waitlists, eligibility assessments and housing policies would be handled by the new ministry, rather than the Ministry of Social Development or the Ministry of Business, Innovation and Employment.

While there would be some cost involved in setting up the ministry, it wouldn't be extravagant, as much of the cost was already being met and "carved up" to different government departments.

"They won't be having huge TV screens in their front foyer and hair curlers, so we'll be scrapping that part of it," Little said in a reference to controversies over spending at "super-ministry" MBIE.

DIVIDEND 'PLACES DISCIPLINE' ON HOUSING NZ

Associate Finance Minister Steven Joyce said Little's "cash cow" remark "doesn't have any basis in reality", given the Government spent hundreds of millions each year on income-related subsidies and other housing support through other government departments.

"To suggest that there's a magic $100 million that's being leaked out of the housing system is a bit silly…

"What the Government actually does is put a heck of a lot more in than it would ever take out."

Joyce said the dividend helped to impose financial discipline on Housing NZ, which had historically been poor at managing its assets to build new houses.

Creating a housing ministry would do nothing to boost the supply of state houses, and would likely slow down construction just as Housing NZ was "ramped up" to build more houses.

"He's [Little] basically saying, 'What I want to do is stop, down tools, rebrand everything, rearrange everything, and then let's go again.

"Frankly I just don't think people will think that's actually a solution."

'FOCUS ON PEOPLE, NOT PROFITS'

Little said Labour would stop the Government's sell-off of state houses and "substantially increase" the number of available state houses, building at least 1000 each year until demand was met.

While the Government was building state houses, they were "actually selling more than they're building", he said.

While the party had not decided how many state houses would be built and where they would go, "a high proportion" would be in Auckland, where there was high demand for housing.

The announcement is the second in a series of housing policies from Labour this week, as the party puts pressure on the Government over rising levels of homelessness and skyrocketing house prices.

On Thursday, Little announced a $60 million package for emergency housing, which he said would put a roof over the heads of more than 5000 homeless people each year.

Another, major housing policy from Labour will be announced at an event in Auckland on Sunday afternoon.