Thousands of state houses are standing empty for months and even years while thousands of desperate families languish on the waiting list.
Figures obtained by Radio New Zealand under the Official Information Act show that in some of the most deprived neighbourhoods of the country, the vacancy rate is between 10% and 25%.
The high rate of vacancies is turning some areas into urban wastelands, a community worker says.
As of the end of September this year, there were 4294 people on the waiting list categorised as in urgent or serious need of housing, up from 2866 in September 2011.
Meredith Akuhata-Brown, a community worker in the Gisborne suburb of Kaiti, says many long-term tenants are being moved on but houses are then left empty for months, even years.
Ms Akuhata-Brown says the houses become targets for vandalism and destroy the spirit of the community.
She says meanwhile, people who no longer fit the strict eligibility criteria are living in squalid, overcrowded conditions.
The Labour Party's housing spokesperson, Annette King, says Housing Minister Phil Heatley says too many houses are the wrong size and in the wrong places - but he has been unable to say where.
"So I agree with the Associate Minister of Housing Tariana Turia, who said it's far better to put a family into a home - even if it's the wrong size - than to have them sleep in a garage or a car."
Mrs King says Housing New Zealand seems reluctant to house people because of the dearth of information.
A Housing New Zealand spokesperson says one of the criteria for qualifying for a state house is the unavailability of local affordable housing, and anyone having trouble finding accommodation should contact the corporation.