Economic Development Minister Steven Joyce says Labour's plans to turn Housing New Zealand from a corporation into a ministry would achieve nothing beyond slowing down the house building programme while the changes were made.

Labour leader Andrew Little announced on Sunday Labour would turn Housing NZ into a public service department and let it keep the dividend it paid to the Government to pay for at least 1000 new state houses a year until the need for them was met.

Mr Joyce said the effort of turning Housing NZ back into a ministry was better spent on building up social housing. He said HNZC was now spending $500 million a year on building and buying new houses, heading up to $1 billion.

"Basically they're saying let's stop and rearrange all the deck chairs and do something different with very little benefit."

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He said HNZC had already said it would not be paying a dividend for the next few years anyway because it was building more houses. "So he's not proposing any significant change."

HNZ had paid a $118 million dividend to the Government last year but Mr Joyce said that was a pittance compared to the amount the Government put into HNZ in accommodation subsidies. HNZC was worth $19 billion.

Mr Little said the new state houses would be built where the need was highest, including a "high proportion" in Auckland. It would be paid for from the foregone dividends as well as extra Government money, although Labour was yet to work out the details. He was "confident" the Government could afford it. The Crown already had land designated for housing in many areas. While the National Government was building state houses - it expects to build 2000 in Auckland over the next two years - Mr Little said it was selling more than it built.

He said turning HNZ back into a ministry would mean it no longer saw itself as a "glorified property manager." He said it would mean HNZ's core function was to look after the vulnerable rather than worry about dividends.