Barnaby Joyce has corrected himself regarding a key One Nation housing policy after telling Sky News his party would force permanent residents to become citizens or risk having their home repossessed.

The Sky News host Andrew Bolt, who interviewed Joyce on Thursday night, later told viewers the bungle demonstrated Pauline Hanson’s party was “literally making up policy as it goes along”.

Hanson herself intervened on Friday morning by saying One Nation’s policy would allow permanent residents to own homes but force “foreign owners” like temporary visa holders to sell properties within two years.

One Nation’s policy on “foreign ownership” on its website states: “We must stop the sale of property to non-residents and non-citizens.”

On Sky on Thursday night, Bolt played a clip of Hanson telling the Senate in 2024: “We must stop foreign ownership of housing indefinitely. Give foreign owners two years to sell up so we don’t suddenly flood the market. If not sold, the property will be repossessed by the federal government.”

In his pre-recorded interview, Bolt asked Joyce if the policy would require people who were permanent residents of Australia to sell their homes.

Joyce at first did not answer directly, stating: “You have to be an Australian citizen if you want the benefits that are indelible about that.”

Bolt persisted, asking again: “Does it [house repossessions] apply to permanent residents as well?”

Joyce responded: “Yes, it does. That’s my belief in the policy. We want to make sure that you become a permanent resident … sorry, excuse me, become an Australian citizen. And that’s going to deal with the issue, isn’t it? Become an Australian citizen.”

After playing the pre-recorded interview, Bolt told viewers that after the recording, “something extraordinary happened”. He said Joyce had called “two people back at the office” to discuss One Nation’s housing policy.

“He must have figured, well, you know, he actually had no idea what Pauline Hanson’s policy in foreign ownership of homes really was, and must have realised this was going a bit harsh,” Bolt said. “So, with our cameras still on him, he rang two people back at the office.” He said Joyce had received two different answers.

“Barnaby left the studio. Minutes later, he came back and said actually there was now a change of policy. Could he record a new answer? And I agreed.”

Bolt then played a second clip in which Joyce said he wanted to provide “clarity”.

“This policy is formative,” Joyce said. “But on further investigation and discussions with One Nation, no, we are not going to be kicking permanent residents out of their house.

“This policy, as it progresses on, we have to absolutely make certain that there’s no unnecessary fallout of it. The concept is quite clear, it’s that we want people to progress through to Australian citizenship. But that should not come at the expense of permanent residents being divested of their house. It was an issue that needed further clarity. I’ve got it. And that’s it.”

Bolt asked who would be subject to the policy of forced property sales, and Joyce replied: “Obviously, it applies to people who are foreign citizens who are basically not permanent residents. And there’s your line.”

Hanson, in posts on social media on Friday, said Joyce had “corrected the record”, claiming “Australians would rather see politicians be upfront and do this instead of lying to avoid embarrassment”.

She said permanent residents would not be forced to sell their homes.

“Foreign owners – temporary visa holders and foreign citizens residing overseas – would be given two years to sell their Australian residential properties under One Nation’s policy,” she said.

“Permanent residents have been accepted to settle in Australia permanently. One Nation’s policy does not require them to sell their homes.”

The Coalition leader, Angus Taylor, has said he wants to restrict first home buyer concessions and welfare payments to citizens only. Those policies have been met with alarm by migration and advocacy groups.

One Nation declined to comment further when contacted by Guardian Australia.