The state may fill the gap left by a big shortfall in a tender for community housing, Prime Minister John Key says.

Key told journalists in Wellington tonight that the Government was committed to providing the extra social housing places offered in the current request for proposals for 1000 social housing units in Auckland. Community providers have proposed only between 225 and 239 homes, and this year's Budget documents show that the Government actually expects to contract for only 175 homes in the financial year starting this month.

"In the end, the Government needs to provide social housing," Key said.

"If we can't get them in one way, we'll get them in another. There are a variety of other ways that we can fill that through Housing NZ."


Housing NZ said last week that it would spend $2 billion to build and buy 4800 houses over the next three years, including 3200 in Auckland -- 1300 this financial year, 1500 in the next year and about 2000 in 2018-19.

It has proposed a series of projects in existing state housing blocks that have been designated special housing areas under the Auckland Housing Accord, but progress has been slow -- possibly partly because the Government has been reviewing the agency's future role given a policy announced last year to sell 1000 to 2000 state houses a year to the community sector.

The first major sale of 1134 state houses in Tauranga has been narrowed down to a shortlist of three consortiums, with a winner due to be announced in mid-August.

The planned sale of 348 state houses in Invercargill has been placed on hold after the sole bidder, Pact Group, withdrew. But 250 state houses in Horowhenua were placed on the market last week along with the local district council's pensioner housing.

The Government has identified an opportunity for more social housing in Auckland through an agreement with the region's iwi last year that when Crown land is sold for housing in Auckland 20 per cent of the homes will be offered for purchase by community housing providers.

Housing Minister Nick Smith said last month that the first Crown land offered under the deal, a 9.2ha block in Moire Rd, Massey, would include an even bigger 30 per cent share, or 59 homes, available for social housing in a 196-home Fletchers development.

Iwi have been offered development rights to the next two blocks of Crown land being sold for housing -- a site next to Pak'nSave in New North Rd, Mt Albert, and a site occupied by the Hebron Mission adjoining Unitec in Great North Rd, Waterview.