The government has put a state house ownership transfer on hold and Labour says it's an opportunity to call time on the policy.

Bill English, the minister responsible for Housing New Zealand, said on Tuesday the transfer of properties in Horowhenua to a community provider wouldn't go ahead "at this time" because consultations with iwi had revealed problems.

The proposal included 249 HNZ properties and 115 council pensioner units in Foxton, Levin and Shannon.

The government was working with Horowhenua District Council on a joint transfer to a third party.

Labour's housing spokesman, Phil Twyford, says it's the second state house sale to fall through.

"The government withdrew 348 Invercargill state houses from sale because it couldn't find a buyer," he said.

"It's time to run up the white flag and admit the state house sell off has been a costly and bureaucratic failure - it should move on and focus on building more state houses to ease the acute shortage of affordable rentals."

Mr English said two iwi involved in the consultations had not yet settled Treaty of Waitangi claims, which created "complexities".