This research undertakes a Life Cycle Analysis (LCA) to determine the climate change potential of a typical newly built steel detached dwelling in Palmerston North, New Zealand (NZ) and assesses its results concerning the 2 °C and 1.5 °C 2050 Paris Agreement targets. The proposed, upcoming policy and actions of the NZ government relating to its residential building and construction sector, which are set with an overarching aim to allow NZ to progress towards meeting the 2050 Paris Agreement targets, are also discussed in this paper. The results of the LCA demonstrate that the projected stock of steel-framed detached houses significantly exceeds the calculated climate budget and eventual 2050 Paris Agreement targets. For both the 2 °C and 1.5 °C scenarios, the magnitude of exceedance of the climate budget is 5.2 and 7.3 times more than the acceptable limit, correspondingly. These findings suggest that the sector will need to undergo a significant transition in order to fulfil the 2050 Paris Agreement targets. In the meanwhile, the sector’s upcoming policies and regulations must be achievable while progressing toward achieving net-zero carbon emissions.