Housing New Zealand plans to sell or redevelop almost a third of its 69,000 houses in a 20-year plan to meet changing needs and bring private homeowners into state housing enclaves such as Mangere and Otara.

The corporation says it has identified 20,285 homes for "redevelopment, reconfiguration, outright disposal or disposal and replacement".

It plans to "exit low-demand areas and premium suburbs in high-demand areas" and reduce its stock of three-bedroom houses that are unsuitable for those in the greatest housing need, who include elderly and disabled individuals and large families.

It also wants to reduce the percentage of state houses from well over half to a maximum of 30 per cent in high-concentration areas such as Mangere, Otara, Mt Roskill and Tamaki in Auckland, and parts of Porirua and the Hutt Valley in Wellington.

Those suburbs were built 40 to 50 years ago when most state house tenants were low-income workers, but chief executive Dr Lesley McTurk said the corporation's growing focus on housing people with high and complex needs meant they were now "concentrating that disadvantage".

She said the corporation also wanted to give existing state house tenants a chance to move out into private rentals or to buy their own homes.

"We are not saying that every street has to get down to 30 per cent," she said. "But the reason for that goal is that if you are trying, which we are, to help people on their pathway to housing independence, you need to have other forms of tenure that they can move to in the same area."

The corporation planned "one of the biggest reconfigurations of state housing that has ever been attempted".

Sales of houses of unsuitable sizes or in areas of low need are expected to accelerate from about $30 million last year to $39 million in the year to next June, $51 million in the following year and $110 million in 2012-13.

Spending on new, more suitable houses in high-need areas such as Auckland will increase even more, from $136 million a year in the next two years to $200 million in 2012-13.

Housing NZ is expected to fund net additions of about 275 state houses a year for the next two years from its operating profits.

The corporation would not quit high-value areas such as the Auckland suburb of Orakei quickly. "If a property is high-value, more than $700,000, we have an alternative approach to reconsidering whether we need that house," Dr McTurk said.

Tenants might have options such as continuing to rent from a private landlord or a community housing provider.

Housing Minister Phil Heatley said the Government wanted to encourage more community housing providers and accepted that that would need extra funding.

24 per cent of state houses have the wrong number of bedrooms for the people with greatest housing need.

19 per cent of state houses are in the wrong places for those in greatest need.