The Government's plan to spend $5 billion on housing is surprising given the debacle over Kiwibuild, a financial expert says.

Bruce Bernacchi, KPMG's head of financial services, said the package which aims to build 8000 new state and traditional houses over the next four to five years is bigger than the $4 billion allocated to supporting businesses.

"$5b on housing surprised me when Kiwibuild has been such a debacle. It's like Kiwibuild rising from the dead."

The Government promised to build 100,000 houses over 10 years as part of its Kiwibuild policy at the last election.

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But last year it dropped that target admitting the goal was "overly ambitious" and meant houses were being built in places with little demand.

Bernacchi questioned whether housing was the best use for the money given immigration would be lower than in recent years, economists were predicting falling house prices and housing was likely to become more affordable.

"I do wonder if that is the best use of $5b. Or whether it should be left up to the private sector?"

Bernacchi said it could be even tougher to build houses if the pandemic saw building sites shut-down again.

But the $5b housing spend-up has met with approval from the social housing sector.

Dominic Foote chief executive of the NZ Housing Foundation which helps low-income rental households on working incomes move to affordable home ownership, expressed support for today's move.

Lt-Colonel Ian Hutson, the Salvation Army's director of social policy, also said the money was needed to answer a huge call and although he was still studying the detail, he welcomed the state house increase.

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The Government plans to borrow the $5b in the next four to five years to fund the initiative.

"It's going to drive levels of employment in residential construction which is a big employer of people and enable manufacturers to supply more product and materials. The forecasts from Covid-19 say the demand for social housing will need to increase to meet needs of people at risk of homelessness," Foote said after today's announcement.

The foundation says its has helped people into affordable home ownership, mainly in Auckland and Christchurch, via shared ownership, rent-to-own, and by managing construction of more than 800 new affordable homes.

The Government said today a $56m fund would also allow low-income families in 9000 more homes to have their houses insulated and heated. All this comes as the state housing waiting list is at a record high of about 15,000, almost three times as much as it was when the Government came to power in 2017.

The 8000 new homes will be split between 6000 state houses and 2000 transitional homes, today's announcement said.

Big state house construction programme welcomed. Photo / file
Big state house construction programme welcomed. Photo / file

Foote said: "We look in the Budget at the role given to the importance of funding more affordable housing to assist those who could be seen to be too wealthy for social housing. People may see a massive drop in income due to Covid-19 but often have a little too much for state housing - that's the area that we support," he said.

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Well over 100,000 working-renting households are lock out of the home ownership market "so we support social housing but it would be great to see affordable house", Foote said.

A Government spokesperson said construction had not started on any of the 8000 homes, meaning they would all be additional to the overall housing stock.

They will also be on top of the 6400 public houses in the four years to 2022 that the Government announced in 2018, and the 1000 transitional homes announced in February as part of the Government's plan to house the homeless.

Green Party Co-leader and Housing spokeswoman Marama Davidson: "The significant investment in public and transitional housing will ensure thousands of low-income families have access to a warm, dry and affordable home. It's a win for everyone, especially for those who need it most.

"Quality housing is a human right. These additional homes will go a long way to reducing housing inequality in Aotearoa."