The Government has scaled back another affordable housing scheme as it looks to save $123.1m across the housing portfolio in this year's Budget.
Some $19.1m will be shifted from the Welcome Home Loan mortgage insurance scheme over five years after demand for the scheme did not meet expectations.
The move comes after the Government this month put the brakes on a national gateway housing scheme that would allow buyers to defer payments on land at new property developments.
The reprioritised funding would go towards non-government provided social housing initiatives.
More savings will come from Housing New Zealand, which is expected to cut its operating costs by $70m over five years, or about $16m a year.
A further $34m will come from Weathertight Services - the agency tasked with dealing with leaky homes claims - after money budgeted to set it up went unspent.
Some of the savings will be reprioritised towards non-government social housing providers, with $104.1m to spent over the next three years.
The funding will be provided through the Social Housing Unit, which the Government established last year to support affordable housing.
Housing Minister Phil Heatley said the Government was committed to improving housing affordability and providing assistance to households in need.
The Social Housing Unit would have funding certainty over time to allow it to embark on longer-term, more ambitious projects, he said.
"It also provides flexibility in terms of how the fund is used. We want the housing sector to come to us with solid proposals that will deliver solid outcomes in a realistic timeframe."
Mr Heatley said every dollar invested with non-government providers delivered two to three times as much social housing as the Government could provide.
The Social Housing Fund has so far approved 15 housing projects valued at nearly $90m, and more were on the horizon.