Christopher Luxon has pulled a U-turn and will now pay back his accommodation allowance, saying its "becoming a distraction".
Earlier on Friday it was revealed the Prime Minister has been claiming a $52,000 per year accommodation supplement to live in his own Wellington home.
Luxon said it "it's an entitlement" and he was "well within the rules" - but now says he will pay back what he's claimed.
"It's clear that the issue of my accommodation allowance is becoming a distraction," he said in a statement on Friday evening.
"As such, I have decided today that I will no longer claim the allowance and will repay anything I have received since I became Prime Minister."
Speaking to Newstalk ZB's Heather du Plessis-Allan around the same time, Luxon said this would mean he would pay back $13,000.
"For me, I'm well within the rights, and well within the rules, but frankly it's a distraction - I will live on my own costs," Luxon told du Plessis-Allan.
The Prime Minister famously has seven houses. His family home is in Auckland's most prestigious suburb Remuera. But now he's PM he spends three days a week in Wellington.
Among the seven Luxon properties is an apartment owned outright directly across the road from Parliament.
He's decided that's a much nicer spot than the prime minister's official residence, Premier House, which is just used for official duties like hosting cricketers.
Earlier this week, the Australian Associated Press reported an Australian cricketer Luxon had met said the Prime Minister wasn't living in Premier House because it was "condemned" and uninhabitable.
"I was asked, 'Do I live in Premier House?' and the answer is 'No, I don't'," Luxon told reporters afterwards.
"As you know, Premier House has long-standing maintenance issues. A report was given to the former prime minister. That same report has been passed on to me and the Government will consider what options we have available to remedy all the maintenance issues that are there. Until then, I stay in my apartment."
Luxon campaigned almost exclusively on easing the cost of living for New Zealanders by reigning in government spending.
But the $52,000 top-up to his half-million PM's salary is tax-free - and more than double the $24,585 a sole parent on the benefit gets. It's also more than a minimum wage worker, who gets $39,312.
News he was taking money from the taypayer to fund his accommodation set off Opposition leader Chris Hipkins.
"Christopher Luxon is treating hardworking Kiwis like a bottomless ATM. He needs to apply his tough love standards to himself," he said.
"He has access to a free house. The prime ministerial residence is available for free for every prime minister. It's a residence that's been good enough for every prime minister up to Christopher Luxon.
"Premier House definitely needs some maintenance work. But, there's nothing in that report that says it's uninhabitable," Hipkins added.
