Housing New Zealand wouldn't pay a dividend to the Government and instead use the money to build new state houses, under a Green Party policy.
Social Housing Minister Paula Bennett has hit out at the plan as a "slogan, not a plan", and the Government says taking a dividend is a way to place a discipline on the corporation.
Under the Green policy, Housing NZ would also have its tax refunded. That, along with the temporary retainment of its dividend, would free up $207 million in the next financial year to build 450 state houses, the party said.
"It's ludicrous that we have around 4500 people on the Housing New Zealand waiting list but Housing New Zealand is forced to prioritise paying the Government millions of dollars in dividend and tax," said Green Party co-leader Metiria Turei.
"All of that money could and should be put towards building state homes and housing vulnerable Kiwi families - the Government just needs to make it happen."
The policy - called Homes Not Cars - comes after recent media stories have interviewed people living in cars and garages.
Finance Minister Bill English last September defended the latest dividend from Housing NZ - $118 million - saying the organisation had spent $400 million maintaining and upgrading houses in the past financial year.
This afternoon he said it was a priority to deliver more social houses by speeding up Housing New Zealand's development programme, and sourcing more homes from Community Housing Providers.
He said that Housing NZ has 924 houses contracted or under construction. The Greens' policy hadn't accounted for the ongoing cost of subsidising the rent, which for 450 properties would be around $28 million over four years, Mr English said.
"The dividend is not the issue, and is the normal way successive governments have used to place a discipline on Housing New Zealand to use its $19 billion of assets well in delivering suitable housing where it is most needed."
Budget 2016 will include $41.1 million to fund 3000 emergency housing places a year, and comes as reports of desperate people sleeping in cars and garages puts a spotlight on the issue.
The funding follows the first review of emergency housing in a field which has been traditionally left to charity.
The Government is expected to call for tenders for agencies to provide the places, with contracts expected to be in place by September.
Most funding is likely to support existing beds. Ms Bennett said funding certainty for existing providers would help them survive, and hopefully expand.
The Greens' announcement comes after Labour housing spokesman Phil Twyford yesterday said Auckland's urban growth boundary had to go because it has fuelled the housing crisis, and that people would not be forced into bad circumstances if the Government acted.
Mr Twyford said the urban growth boundary created an artificial scarcity of land, driving up section costs. Land inside the boundary is up to 10 times more valuable than rural land.
Mr English was broadly supportive of that position, saying yesterday that there was now a parliamentary majority to override any decision made by the council.
The Act Party has also come out in support of Labour's position.
Today, Mr Twyford said the Government needed to clearly state its position.
"Does it or doesn't it support getting rid of the urban growth boundary? Or do they go along with Auckland Council's position that it is enough to simply inject a bit of new land every few years into a highly speculative land market," Mr Twyford said.