The Auckland relocation grant scheme will end in February.
The government says offering people $5000 to help them move out of the city is "just moving housing pressure to other parts of New Zealand".
The previous government introduced the scheme in June last year to help relieve Auckland's housing shortage.
Several hundred families and individuals took it up and it was extended in December last year.
Housing Minister Phil Twyford says it has had the effect of increasing state house waiting lists in other towns and cities.
"Since the relocation grant was introduced there has been an across-the-board increase in the demand for public and private housing, especially in regions and towns close to Auckland," he said today.
"This initiative was a rushed and piecemeal response...National had failed to fund this grant beyond the end of this year and so instead of seeking new funding the government has decided to discontinue the grant."
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