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New Zealand state housing includes a significant portion of problematic buildings constructed after the public housing scheme launched in 1936. Most of these houses are still uninsulated, thus, cold, draughty, mouldy, and progressively decaying; however, as they are fundamental elements of the country's culture, society, and environment, and are built with good quality materials and sound construction, they are suitable candidates for effective energy upgrades. This paper presents findings of a study on problems and opportunities of retrofitting the state houses built between 1940 and 1960 in the Auckland region. It advocates strategic national policies and initiatives for retrofitting, based on more challenging performance thresholds. The research defines and virtually implements an incremental intervention strategy including different retrofit packages for a typical 1950s stand-alone house. Indoor and outdoor environmental parameters were monitored over a year, and data used to establish a base case for thermal simulation. The upgrade packages were then modelled to assess their impact on the house's thermal performance, comparing heating requirements and comfort of various insulation and ventilation options. The paper reports on effective ways of preserving the integrity of such a house, while improving its thermal performance to the EnerPHit standard, and discusses the benefits of introducing this holistic approach into New Zealand retrofit practice. [ABSTRACT FROM AUTHOR]