The policies contained limited detail on what form the policies would take or when they would come into effect, the Treasury said in its Half-Year Fiscal and Economic Update.
The policies could be more effective than assumed and meant aggregate residential investment expanded faster to meet the demand created by KiwiBuild.
"Conversely, constraints may have a more prolonged impact and it could take longer until policies take effect.
"The extent of demand for KiwiBuild housing is a further source of uncertainty to our assumptions on the recycling of proceeds from sale."
The Government’s KiwiBuild programme aims to deliver 100,000 affordable homes over 10 years for first-home buyers through a combination of existing Crown programmes, purchasing private developments off plan and construction of additional dwellings.
The Treasury projected the real and nominal value of residential investment as an input into the tax and fiscal forecasts.
But the Treasury said it did not forecast the number of new dwellings, reflecting how it used the economic forecasts for tax revenue forecast.
From a tax forecast perspective, there was little different between a $1million investment generating two dwellings or three dwellings, although such differences clearly mattered from the perspective of housing more people, the Treasury said.
Residential investment growth was expected to remain relatively weak in the near term. While residential investment was at a high level, the construction sector faced constraints across several dimensions, as well as subdued demand growth.
"All else unchanged, these capacity constraints also act to restrain the rate of growth in supply of new dwellings over the longer term."
The Government would invest an initial $2billion as part of the KiwiBuild programme.
The Treasury assumed the phasing of capital injections and existing capacity constraints in the sector meant there was a lag before additional residential activity was realised.
The capital was assumed to be recycled as dwellings were sold and the proceeds reinvested.
The level of nominal residential investment was assumed to be 10% higher in the June 2022 year than it would otherwise have been and was cumulatively about $5billion higher across the forecast period.
There was likely to be a degree of substitution from the private sector to public sector-led investments in KiwiBuild housing, particularly in earlier years while policies alleviating constraints were scaled up. The extent of the substitution was difficult to quantify at this time, the Treasury said.
