However, there would be no offer of continued assistance after buyers signed up, Mr O'Keefe said.
"Under the auspices of the marae, we would help the family move in, we would help them wallpaper if it needed doing, help with landscaping and offer them support - the whole community would have put a cloak around that family."
Te Aranga Marae found out about the sales "by chance", and saw this move as, "two steps back".
The Flaxmere Housing Project placed emphasis on healing the community from inside out - in turn solving a multitude of social issues.
Hastings District councillor Wayne Bradshaw said acquiring the houses would not only be a solution to soaring rent prices, but problems such as bad insulation and overcrowding, which cost the Crown money.
"At the moment Housing New Zealand manage the properties, but they don't do anything to help improve the families. It's not the houses that get sick, it's the families."
A recent asthma study revealed an overnight hospital stay cost the Government $1200 per child, while adults were $1000; it was also $92,000 a year to keep one inmate in jail.
"They are known statistics, with the programme at the marae there would be a social community contract linked into the project [for instance] the tenant will sign up and register at a medical practice.
"Every member of the family would have a medical warrant of fitness which would indicate whether they were overweight, if they smoked, have asthma - that would draw a line in the sand as to the health of that family, if they smoke we could sign them up with a quit-smoking programme."
Te Aranga Marae would buy the homes and lease or sell them on to tenants at an affordable price, though the responsibility would come with other conditions too, Mr O'Keefe said.
It's an idea initially floated by Associate Housing Minister Tariana Turia who supported the marae taking over properties when the Government was ready to divest its stock.
During a meeting with Housing New Zealand CEO Glen Sowry and Mr Groufsky at their behest in April, Mr O'Keefe said assurances were made that Te Aranga Marae was the preferred Social Housing Provider, though nothing was signed.
"What we wanted to know was, 'are we at the table, are we even in the room?' they said, 'if you weren't, we wouldn't even be here'.
"We were told, 'we want to help, we don't want to hinder you' so we came away from that meeting feeling buoyant."
They had other backing too, from the likes of Finance Minister Bill English and Housing Minister Nick Smith.
"None of them said 'no', none said, 'this is a bad idea' - the Government is urging, in fact pleading with the populous to come up with an alternative - Mr English said to me, 'we fix the doors and windows, we don't fix the people, you fix the people'."
A Housing New Zealand spokeswoman said they were not in "negotiations" with the group, but had offered advice as to how they could become a Social Housing provider, should they wish to go down that track.
The marae had already completed about three-quarters of documentation required for that registration, when they were recently informed of changes to the body which governed state housing.
"After getting so close, we have just been told they have formed another entity within Treasury to take the responsibility of these homes away from Housing New Zealand and we have got to start all over again, building relationships," Flaxmere U-Turn chief executive Ana Apatu said.
