Parts of Christchurch will have to be abandoned and up to 10,000 homes could be demolished as a result of last month's earthquake.
Earthquake Recovery Minister Gerry Brownlee previously told NZPA early estimates suggested 100,000 homes could need repairs while 10,000 could have to be rebuilt.
Prime Minister John Key confirmed those numbers this afternoon, and said the Government was working to identify which homes would have to be demolished.
"There will be some homes that can not be rebuilt and, as a result of the second earthquake, potentially, some sections and some areas of Christchurch which will need to be abandoned,'' Mr Key said.
"We will have to present other alternatives for people to live in because the land has been so badly damaged we can't fix it, certainly not in a reasonable timeframe.''
Those areas could be limited to streets, but in some cases could be larger, he said.
"The liquefaction damage from the second earthquake is so great, and the land damage, the early indications are, that it is so significant we can't remediate it in any timeframe.''
Mr Key said one possibility for residents in those areas was a cash offer.
"The second option is 'here is a sub-division and you can choose a site and maybe a building plan that's commensurable with the insurance model you have'.''
Mr Key said Housing New Zealand and the Department of Building and Housing were looking at a range of modular housing options, but that currently there was more temporary accommodation available than people were taking up.
"There are other options for people, many people don't necessarily want to move out of their homes despite the fact that there are no basic infrastructure services there.''
A National State of Emergency has been extended for another seven days and is expected to last for a number of weeks.
Mr Key also announced that a provincial public holiday and a national memorial service would be held on March 18.
Two minutes' silence would be observed from 12.51pm, the time the deadly magnitude-6.3 quake struck on February 22.
The death toll from the earthquake remained at 166 today, with an expected final toll of more than 200.
Police named three more of the dead, bringing the number of those named to 44, and said post mortems on the victims were expected to be completed this week.
The 70-member strong United Kingdom Urban Search and Rescue (USAR) team will be leaving Christchurch to return home this evening.
USAR teams completed work at the Grand Chancellor, and had cleared 500 buildings in the city by tonight.
National Controller of Civil Defence John Hamilton said teams were continuing to move through Christchurch's city centre, deconstructing the quake-damaged buildings.
"The recovery of casualties is distinct from demolition of cleared buildings where there is an obvious and significant risk to safety or they are seriously impeding the recovery process,'' Mr Hamilton said.
"In those cases, the cleared buildings will have to be either partially or completely demolished to make sure the site and surrounding area are safe.''
Mr Hamilton said every effort was being made to contact owners of buildings that needed to be demolished, but in four cases owners had not been able to be reached.
"Where we can't contact an owner and there is a need to move quickly, then I am the one finally responsible for approving any demolition,'' Mr Hamilton said.
"I completely understand the need for people to access businesses and their property as well as the significant historical importance of many buildings and their contents.
"I want to assure people that we are doing everything we can to try to accommodate this, but again the overriding concern must always be the safety of people over property.''
More cordons in the city are to be lifted this week, improving public access to the CBD.
The city has been divided into four green zones where restricted access will be allowed, and a red zone closed to the public.
Zones one and two to the east and west of the city centre opened yesterday, and Mr Hamilton said today that zone three, to the north, would reopen to residents and business owners on Thursday, and to the public on Friday.
Mr Hamilton did not say when zone four or the red zone would reopen.
Two more Recovery Assistance Centres, where people can access welfare information and services, opened today - one at the Lyttelton Recreation Centre, the other at the Sydenham Community Centre - bringing the total number of centres to eight.
The Canterbury District Health Board (CDHB) said each centre had visiting or on-call health staff, and that staff could also organise transport for patients to GPs, to hospital appointments, or to a social service agency.
CDHB reiterated a call for people to continue to boil all water until the council gave the all clear.
