Community groups say they have clients who are being forced to move three or four times a year because their housing situation is unstable.
The comments follow the release of a report on the delivery of state housing services for those most in need.
The report by the Housing Shareholders Advisory Group made 19 recommendations, including giving community groups, Maori and social agencies a greater say in the running of state houses.
Other recommendations include ensuring that Housing New Zealand develop new policies to manage its tenant base and encourages a greater involvement by third party suppliers.
It also says New Zealand cannot rely solely on the actions and initiatives of Housing New Zealand to create homes and suggests other agencies share the task.
The report found that New Zealand faces an overall shortage of affordable homes and the advisory group warns the current system is not equipped to meet future demands.
It says the demands of those who need social housing and where it is required are changing.
The Salvation Army's Major Campbell Roberts, one of the advisory group's seven members, says the challenge for the sector is so great new partners are needed.
He says the non-government sector has the capacity, but it needs the Government's help to become involved.
Major Roberts says if a child does not have a stable address, they are denied the full benefit of the education system and access to medical services.
However, the advisory group warns the inclusion of third parties is not an invitation for the Government to abandon the state housing sector or to reduce the number of properties.