Housing New Zealand has banned people other than existing tenants or their partners from living in state houses while on bail, unless they have the agency's permission.
New tenants also need written approval before anyone on home detention or parole can stay with them.
Housing New Zealand defended the tough new tenancy rules on Tuesday, saying it is trying to help vulnerable tenants who feel threatened.
Chief executive Lesley McTurk told Checkpoint that some Housing New Zealand tenants are being pressured into giving up their homes due to offenders being bailed into their care.
Ms McTurk says the new policy it is intended to give vulnerable tenants protection against losing their tenancy.
"We have experienced occasions where tenants are pressured to allow someone to be bailed or paroled to their address. We sometimes find that this can add stress to the rest of the household, overcrowding and can create problems in the community.
"It's come up enough for us to believe that it would help vulnerable tenants to sustain tenancies."
The Criminal Bar Association says the policy is discriminatory and contradicts Housing New Zealand's main role in society - to help people who cannot get housed elsewhere.
The Prisoners Aid and Rehabilitation Society also opposes it, saying stable housing is essential for criminals' rehabilitation.
The managing lawyer at Whitireia Community Law Centre in Porirua, Bill Bevan, says the rule is unfair because many people on bail are never convicted.
He says police already vet addresses and Housing New Zealand can already evict people who cause problems at its properties.
Mr Bevan says the rule could make it difficult for some people to find any accommodation, and could lead to children being separated from their parents or extended families being divided.
New expectations of behaviour, says Housing NZ
Housing New Zealand chief operating officer Stephen McArthur says the new policy for those on bail does not make any assumption about a person's guilt.
Mr McArthur told Morning Report the policy is not about determining guilt, but is an attempt to ensure the rights of both tenants and neighbours are met.
He says the move sets new expectations of behaviour in state houses. The policy, which is for new tenants, was introduced in May.
Mr McArthur says children released on bail would need Housing New Zealand's permission before being allowed to return home.
Measure will increase crime, say Greens
Green Party housing spokesperson Sue Bradford says people in direct need of assistance will now suffer another round of punishment.
Ms Bradford says people desperate for shelter can only mean more crime and less security for a neighbourhood.
She says lack of housing is a trigger for crime, as people are more likely to commit offences to enable them to survive.