King sees potential pitfalls in state housing shake-up

He said that while the reforms could see more tenants in the market looking for property, the potential transfer of Government property and cash to housing organisations could in effect create Government subsidised competition.

"It may mean that there is more demand for private rental housing, but another one of the plans they've got is that they're looking at giving state houses and potentially income related rent as well to social housing providers," King said.

"That basically gives social housing providers the potential to be able to go to the private finance industry and actually use those assets and cash flow to get loans and build more property, which could be potentially very negative for the private rental industry."

King spoke in the wake of a Q&A interview with Housing Minister Phil Heatley, who said, "We want to focus on those most in need, so what we're going to do is pass cash, some surplus state houses and also surplus Crown land to these housing organisations across New Zealand."

While in favour of reforming the state housing sector, King is wary of what would be in effect a state created competitor, "especially when it's given a very unfair advantage of free assets, free cash flow and the ability to use those to be able to borrow and build more."

One plus for King would be if the handing over of assets also applied to private landlords.

"It may also be that certain private individuals may be able to get similar deals, it may be that some private sector providers will be able to in fact provide better social housing so it's not all negative, but there is potential there for the rental housing market to grow above real market demand."