Five Auckland KiwiBuild apartments are set to be sold on a first-come, first serve basis after failing to sell during the ballot process.
The properties in Auckland's 340 Onehunga Mall development were originally offered in a ballot but are now set to go back up for sale after the ballot winners and runners up withdrew from buying them.
The properties include two studio and three one-bedroom apartments priced from $380,000 to $500,000.
But while there were other people in the ballot for the apartments, these buyers will not get another crack at purchasing the properties.
Instead, the apartments will be sold through real estate agents Bayleys on a first-come basis for any interested buyers who qualify under the KiwiBuild programme as first-home buyers.
Minister Twyford said KiwiBuild had made a mistake by not first approaching other people who applied through the ballot before putting the homes on the open market.
"My understanding is that when someone who comes through the ballot on top and then subsequently pulls out, my expectation was always that those opportunities would then be passed back to people in the ballot," he told reporters.
A KiwiBuild spokesman apologised to those in the original ballot and said the KiwiBuild programme was still in its infancy and going through a "learning process".
"It is KiwiBuild's usual practice when a sale isn't completed following a ballot to go back to unsuccessful ballot entrants and ask if they would like to buy the property," he said.
"We apologise [that] that didn't happen in this case. This was the first off the plans ballot and KiwiBuild is refining its processes."
The KiwiBuild team said 20 of the 25 KiwiBuild apartments up for grabs in the Onehunga development had sold.
The five apartments that failed to sell had five, eight, 10, 11 and 14 people competing in the ballot to buy them.
However, National Housing spokeswoman Judith Collins said the latest episode showed New Zealanders were "quickly losing interest in the Government's KiwiBuild policy".
"The ballot closed for the first houses in Wanaka and Te Kauwhata last month. Across these developments only four of the 20 houses sold, a worrying sign given the Minister has agreed to buy almost 400 houses across the two sites," she said.
"The Minister has underwritten around $200 million worth of houses across Wanaka and Te Kauwhata. Given that only four have sold, serious questions need to be asked about the level of due diligence Mr Twyford undertook before agreeing to sign such a contract."
She said that while Twyford had "made a big deal about the 40,000 people who have made an expression of interest in KiwiBuild", fewer than 300 had actually entered a ballot.
"It is becoming clearer by the day that there is a lack of enthusiasm for KiwiBuild. There are not enough buyers, and it is not adding new houses to the market."
While apologising to those that entered the ballot for the apartments, the KiwiBuild spokesman said "there was no expectation that all KiwiBuild homes offered off the plans will sell through the ballot".
"Typically, not all homes sell off the plans and any that are left are sold once they are completed. KiwiBuild is no different."
The Onehunga development is due to be completed in August next year