Newshub can reveal that the Government not only failed to sell some KiwiBuilds to first home buyers - but it couldn't even flog them off to Housing New Zealand (HNZ) as they didn't fit design standards.

However, the Government isn't ruling out turning unwanted KiwiBuilds into state homes in the future.

As part of the KiwiBuild reset, the Government put KiwiBuilds in Wanaka, Te Kauwhata and Canterbury on the open market.

First the minister considered turning them into state homes - but the answer is no.

"We had a really close look at them. In many ways it would have been a nice tidy way of dealing with the situation," says Housing Minister Megan Woods.

Housing NZ builds houses that you can fit two single beds into a single bedroom

"For me, the test had to be - would these have been houses that we would have built anyway for HNZ in these places?"

In a Cabinet paper, Woods outlined that the homes are not suitable for Housing New Zealand as they don't fit their design standards. The bedrooms aren't big enough.

"Housing NZ builds houses that you can fit two single beds into a single bedroom," Woods says.

The minister says first home buyers aren't looking for big rooms.

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Design wasn't the only problem - demand was too.

For example, at the end of September there were 13,966 people on the state housing waitlist. Just 10 people needed homes in the Queenstown Lakes district, where the unwanted Wanaka homes are.

"I'm not going to tell people to move to Wanaka if that's not where they live," Woods says. "We didn't have demand there."

There are currently 75 unsold KiwiBuild homes. Fifteen have been on the market for longer than six months. 

Woods isn't ruling out offering any that will not sell to Housing New Zealand first in future - although she says there is no solid policy on that in place.

"I think it's told us that there was no need for those houses to be built there in the first place," National's housing spokesperson Judith Collins says.

Each house will be looked at on a case by case basis to make sure it's in the right place - and the rooms are big enough.