The OECD is calling on the Government to make significant changes to its under-pressure KiwiBuild programme, saying it should do more to focus on people on low incomes.
It wants the Government to reallocate money from KiwiBuild to social housing.
This comes as the Government prepares to unveil the policy's reset, after it has failed to meet expectations.
Despite this, Finance Minister Grant Robertson this morning said KiwiBuild was never "necessarily aimed at very low-income people," but for first-home buyers.
His comments came at a press conference, where members of the OECD presented their survey of New Zealand's economy.
The report said that current wellbeing in New Zealand was generally high but some weaknesses had emerged.
One such area of weakness was around housing.
The report said more needed to be done when it comes to increasing housing affordability and bolstering supply.
Although the report said schemes such as KiwiBuild aim to address these issues, the OECD thinks the policy needs a shake-up.
"To assist low-income renters, the supply of social housing should be expanded, including by reallocating money from KiwiBuild."
Speaking to media, OECD Deputy Secretary-General Ulrik Vestergaard Knudsen said most low-income renters in New Zealand face very high housing costs.
"What we are saying here in our report is that maybe there is scope for looking a little bit more at rental housing, given the fact that many of the people that the Government is trying to help with this programme cannot afford to buy homes of their own.
"One of the things we're saying is to have more of a focus on rental housing and maybe look at some of the density requirements for land use."
Although Robertson said the OECD has some useful ideas, Housing Minister Phil Twyford would soon be unveiling the KiwiBuild reset which would address these issues.
But he did say that the premise of KiwiBuild was about first-home buyers – "it isn't necessarily aimed at very low-income people; we never said that's what KiwiBuild was for".
Speaking to media this morning, Twyford was also reluctant to comment on the policy before the reset.
But he did say the OECD's idea to move money from KiwiBuild to social housing was problematic.
"The idea of just transferring the KiwiBuild allocation across to public housing doesn't really work because it costs a lot of money to build public housing, as you continue to own them."
KiwiBuild – which was allocated $2 billion – recycles the money when homes are bought and sold.
Meanwhile, Twyford has yet again pushed out the expected date the policy's reset will be announced.
In January, he said the reset was a few weeks away. That was pushed out to April, then to June.
This morning, Twyford said the reset would be unveiled in July.
"We wanted to take the time to get it right," he said, but told reporters the reset would be "pretty comprehensive".
Speaking in the House today, Prime Minister Jacinda Ardern would not confirm the name "KiwiBuild" would survive the reset.