Key Points:

The Government is looking at ways to redevelop state land so that new housing built on it can be offered to first-home buyers.

Massey University Professor Bob Hargreaves has suggested the Government build houses on state-owned land to sell to first-home buyers to help them get into the housing market.

The building programme could be funded by selling a small proportion of existing state homes.

Professor Hargreaves said Housing New Zealand (HNZ) currently rented out 66,000 state homes, which were worth on average $200,000, a total value of $13.2 billion.

He said that, over the next five years, the Government could sell 10 per cent of its rental houses at market value. Existing Housing New Zealand tenants would be given first option, with the next option going to other first-time buyers.

The sale proceeds of $1.32 billion could be used to built 6600 medium- density rental units in areas of greatest need.

"The net result might be that, instead of adding say 1500 units to the housing stock each year, HNZ could add around 8000 units," he said.

The plan would cost the taxpayer nothing, would add 6600 units to the housing stock each year and "the third gain is that the increase in supply is likely to apply significant downward pressure on house prices and rents at the lower end of the market".

Housing Minister Carter said the Government had begun redevelopment projects that incorporate Professor Hargreaves' ideas.

In the Glen Innes/Panmure area of Auckland, HNZ owned 50 per cent of properties. The Government had a project under way which would see HNZ buy more houses in the area, sell others and build new ones, which could be sold to first-home buyers.

The Government was considering a similar scheme in Otara and Mangere, where it also owned large areas of state homes, Mr Carter said.

In Hobsonville, it had another project where affordable housing was being factored into plans for 3000 new homes. There would be a mixture of "high-density, high-value" $1 million properties, 500 state houses and another 500 properties, which would be sold to first-home buyers.

The properties were being built on vacant Defence Force land.

At Weymouth, the former girls' home was being redeveloped to include private ownership, first-home ownership and state housing.

The Government was also looking to develop similar projects in Hamilton and Wellington.

Mr Carter said the Government was doing what Professor Hargreaves suggested: "What he's saying is we should be doing more of it."