New Zealand housing action group has penned a letter to a Gold Coast charity threatening protests if it buys state houses from the government.

Australian not-for-profit Horizon Housing has shown interest in buying as many as 500 state-owned houses in New Zealand.

Prime Minister John Key said on Monday that he's open to doing business with the organisation but Labour and the Green Party have criticised the deal and say it's only being considered because potential New Zealand buyers aren't interested.

State Housing Action Network, which opposed the sell-off, has written to Horizon warning it not to get involved in the government's plan.

"Already New Zealand's most credible social-housing providers, the Salvation Army and the Methodist Mission, have announced they will not buy into this policy," the group's convenor, activist John Minto, told Horizon's chief executive Jason Cubit.

"We are asking the Horizon Housing Company to do the same.

"If you decide to proceed and cooperate with this policy it's only fair that we point out you can expect to be the subject of ongoing community protest action here in New Zealand."

The group said it opposed the plan because it believed only the government had the resources and the capacity to provide quality, affordable homes for every family who needs them.

Mr Key has denied the government had sought interest overseas because there were no takers on home soil.

"It's certainly not true that none of them are interested. There's lots of interest," he told TVNZ's Breakfast on Monday.

He said he had no particular opposition to an overseas operator, citing UK firm Serco, which operates Auckland's Mt Eden Prison.

"In principle, if a Queensland-based charity was interested there's not a lot of difference between that and another organisation in New Zealand," he said.

"It would depend a bit on what other wraparound services they offered and what their long term ambitions were in New Zealand. I don't know the answers to those (questions) but you wouldn't rule them out just because they're based in Queensland."