The Labour Party says the Government needs to guarantee that state housing tenancy reviews won't lead to vulnerable people being forced out of their homes.
From July, all Housing New Zealand tenancies will fall under a review process aimed at moving some people into private rentals if they can afford it.
Social Development Minister Paula Bennett says the reviews will ensure state houses are given to those most in need, and Housing Minister Nick Smith says it's unfair that people who no longer need to be living in a state house continue to do so while others are desperate for suitable housing.
Labour's housing spokesperson Phil Twyford says the process will cause a lot of anxiety and insecurity for state house tenants.
"They're wanting to impose insecurity of tenure on people and I will not stand by and see pensioners and families with young kids and people with disabilities being thrown out in the street just so Nick Smith and Paula Bennett can look tough on state house tenants."
Mr Twyford says families in stable homes have better health, education and work outcomes, and the new policy takes that away.
However, Dr Smith says circumstances change and years after a family first moves into a state house they could get a better-paying job, a single parent might remarry or children will grow and move out.
"We have literally got thousands of three- and four-bedroom homes with only a single person living in them at the same time as having families in overcrowded situations. That is not best utilisation of the Government's assets."
Dr Smith says there are 68,000 people in state houses and the Government is conducting 800 reviews of people already paying market rents or close to them. He says people will be moved to a private rental house only if one is available.
The executive officer of the Property Investors Federation, Andrew King, says the reviews will help many families get into better housing. He says many are living in overcrowded homes, or even in their cars, and the policy can only be a positive thing.
Housing test lab launched
Launching a housing "test lab" at Hobsonville Point in Auckland on Friday, Nick Smith said people's expectations about homes have to change if the country is to solve its housing crisis.
The lab is a group of three compact houses built on one 450-square-metre site, including a one-bedroom house with a footprint of 40 square metres.
Dr Smith said houses in New Zealand have been steadily getting bigger over the past 25 years and that can't continue if people want more affordable homes. He said the lab shows that small, comfortable and affordable homes are possible if they're cleverly designed.
"By using the Government's ownership of the Hobsonville Development Company to do some things outside the square, it's not just a laboratory experiment in the sense of new building design, it's actually around experimenting with what sorts of different living people are comfortable to live in daily but also to pay for in a market sense."
Auckland deputy mayor Penny Hulse said the only way to solve the city's housing problem is to build houses smaller and closer together.
The houses will be open to the public every day for the next six months.