According to news website www.guide2.co.nz, Prime Minister John Key has rejected a Treasury recommendation to limit how long tenants could live in a state house.

Housing NZ was given $124 million to upgrade state houses under the Government's economic stimulus package.

Treasury expressed concerns about transparency around Housing NZ capital spending, Radio New Zealand reported today after obtaining information under the Official Information Act.

Treasury recommended ministers seek assurances and greater transparency about the way money was being spent.

Prime Minister John Key says while Treasury has some concerns about how Housing New Zealand spends its money, the Government does not intend to follow its more hard-line recommendations, one of which was a recommendation to limit how long tenants could live in a state house.

"While that might produce an economically more effective outcome I don't think it would be politically acceptable for us."

Housing Minister Phil Heatley has put the corporation on a monthly reporting regime and has required Housing NZ to give details of the maintenance work, upgrades and new state houses that the corporation is working on.

Work on the Hobsonville housing development in Auckland would be slowed down over concerns about how the project to build 1100 homes was being run.

Mr Heatley said the corporation needed to be more realistic about the demand for new houses, given the depressed property market.

Labour housing spokesman George Hawkins said any scaling back of the project to build affordable housing was a backtrack and would make it harder for families trying to get homes.

Mr Hawkins said now was a good time to build affordable homes given capacity in the construction sector. The work would give employment and stimulate the economy and benefit aspiring home owners, he said