Mr Key's state of the nation speech yesterday drew protests from Opposition politicians and people protesting the sale of any of the houses owned by the State.
The Government now refers to ''social housing'' rather than state housing and Mr Key has appointed three ministers with responsibility for various parts of the housing industry.
Finance Minister Bill English is the Minister responsible for Housing New Zealand, which owns or leases 68,000 properties.
Nick Smith is the Minister for Building and Housing and Paula Bennett is the Minister for Social Housing, in charge of supporting New Zealanders with the highest housing needs.
Mr Key outlined help already or about to become available for home owners and home buyers. That included the new HomeStart programme, which he said would help 90,000 people into their first home over the next five years.
For people on low incomes, the Government subsidised housing costs from a total budget of $1.9 billion this year. About $1.2 billion was for the accommodation supplement, which helped people with the costs of private rentals and sometimes mortgage payments.
The other $700 million was for income related rent subsidy for low income people with the greatest housing needs, he said.
The Government's overall package of social housing reforms had five objectives:
• Ensuring people who needed social housing support from the Government received it.
• Helping social housing tenants to independence, as appropriate.
• A reform programme to ensure properties used for social housing are the right size and configuration, and in the right areas.
• Helping to increase the supply of affordable housing for sale, especially in Auckland.
• Encouraging and developing more diverse ownership of social housing.
More diversity could mean involving community housing providers in the redevelopment of Crown land, Mr Key said.
The overwhelming dominance of Housing New Zealand left little room for non government organisations to play a significant role.
''But we can change that if community housing providers take ownership or management of some existing Housing New Zealand properties, with tenants in them.''
The Government was prepared to do that if it was satisfied it could get better services for tenants and fair and reasonable value for taxpayers, he said. That would be done in areas where demand was stable and where housing providers were keen to expand.
The Government would consider selling between 1000 and 2000 Housing New Zealand properties over the following year for use as social housing run by approved community housing providers. It would be done through open, competitive processes, he said.
''Selling properties in this way doesn't reduce the number of social housing places. It just means more of the tenancies will be managed by a non government housing provider, rather than Housing New Zealand.''