Finance Minister Grant Robertson says the Reserve Bank is easing restrictions on mortgage lending because it now has a "friend" running the Government.
From next year, no more than 15 percent of a bank's new mortgage lending can be to borrowers with less than 20 percent deposit - up from 10 percent.
That means more buyers with smaller deposits - usually younger first-home buyers - will be able to get a foothold on the market.
Mr Robertson told The AM Show on Thursday it was a "first step" towards what he hopes are more significant reforms.
"What we've seen with what [Reserve Bank Governor Grant Spencer] has done here is that he's got some confidence now the housing market heat's coming down, and he's prepared to loosen these restrictions.
"We're also really pleased that he acknowledged one of the reasons he's got confidence is that we've got a plan to actually take the heat out of the housing market - build those KiwiBuild homes, crack down on the speculators."
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The previous Government refused to acknowledge New Zealand, and particularly Auckland, was in the midst of a housing crisis with skyrocketing prices and growing homelessness.
"He had to have a Government that was working with him to solve the housing crisis - not deny that it existed, but have policies to change it," said Mr Robertson.
But that solution won't be to bring the prices of existing homes down, if Mr Robertson has his way. He would be happy for prices to keep rising, but at 2 or 3 percent a year - not 10 or 15, as they have been.
"I want them to go up more slowly - people need to have value in their properties, but it needs to be a market that's affordable. You don't get that unless you're building a mixture of homes - that's the big problem that we've had. The homes that are getting built are the big 150sqm, three-bathroom homes. That's not what KiwiBuild is about."
He expects KiwiBuild to deliver 16,000 new homes in Labour's first term, ramping up to 100,000 over a decade. Anyone who hasn't owned a home before will be eligible for the ballot, with no other means-testing done.
"I want house prices to moderate - what that means is a sustained period where they're not going up by 20 percent, but people get value in their priorities - but they're aren't going up to the extent that people can't afford to be in the market."
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