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It also appears Labour will not meet its election promise of building 10,000 houses a year for 10 years under the new plans.
Housing and Urban Development Minister Phil Twyford yesterday officially launched an ambitious programme whereby homes built under the KiwiBuild banner will count towards the official target.
He said, in the first year, the Government would deliver 1000 KiwiBuild homes. Production would be increased to 5000 homes by June 2020 and 10,000 homes in June 2021.
The targets are reduced from Mr Twyford's claims during the election campaign which were 10,000 houses a year for 10 years.
''All eligible buyers will have an equal chance to own a KiwiBuild home at cost price through a ballot system.''
Among the main criteria for being part of the KiwiBuild ballot system were sole purchasers having income below $120,000 and couples having income below $180,000.
Mr Twyford said it was known New Zealanders at and below those levels of income were struggling to buy a home, especially high demand in areas such as Auckland and Queenstown.
KiwiBuild was the largest state-backed home building programme in generations, he said.
National Party finance spokesman Amy Adams was in a race with Mr Twyford before last year's election to make building affordable homes the highest priority for their
The two MPs were announcing new affordable housing projects in the same centres on the same day, at times, despite National not acknowledging New Zealand had a housing crisis.
Now, Ms Adams says KiwiBuild is a failure for lower-income families.
Mr Twyford had set the eligibility criteria for KiwiBuild so wide 92% of first-home buyers were eligible because he knew he would fail to deliver houses affordable to lower and middle income earners.
''This is the Government running up the white flag.''
Struggling families would miss out in favour of higher income families and people with significant cash assets, Ms Adams said.
There were 24,000 first-home buyers a year and the Government was now only planning to deliver 1000 homes in its first 20 months in office.
It was ironic Labour did not think someone on the average wage deserved a tax cut but believed families earning $180,000 deserved a subsidy to help them buy their first home, she said.
Real Estate Institute president chief executive Bindi Norwell was surprised the threshold for couples was $180,000, well above the average combined household income of $96,876 for the country or $109,772 for Auckland.
It did mean more people would be eligible than was initially anticipated which could be a good thing, given how tough it was even for those
on a good income to buy themselves a first home.
The institute would like a percentage of the properties to be allocated to low income earners, she said.
''This will ensure those who really need it the most, like a single parent working two part-time jobs to support their family, will have a higher chance of having their name pulled out of a ballot than a single person earning $120,000.''
Mr Twyford said as KiwiBuild activity increased, the Government was working on programmes to complement KiwiBuild and enable more families to take advantage of the opportunity.
In particular, the Government was investigating a progressive home ownership scheme - a joint New Zealand First and Greens commitment.