Surges in house prices have made the property-owning middle classes feel suddenly wealthy, but the boom has also created a housing crisis for the poor and first-home buyers.

A quick glance at newspaper headlines around the country shows the shortage of affordable housing is reaching crisis levels in most areas and there are long-standing housing shortages on the East Coast and in Northland.

In Golden Bay, teachers and skilled tradespeople are being forced out of the area because they cannot afford housing, and vineyard workers are being forced to sleep in cars and vans throughout Marlborough as the region's accommodation shortage bites.

In Marlborough, it has been reported that hotels are using the accommodation shortage to put up rates, and some people are paying $180 a week for a room with no facilities.

Not surprisingly, the brunt of the shortages is being felt in Auckland. Last month, the median house price rose 2.7 per cent to $339,000, and we have been told you need an income of $70,000-plus if you want to buy a house in Wellington or Auckland with a 10 per cent deposit.

For many young people, single-income families and low-income earners, that sort of wage is a pipedream. The problem is that people who cannot afford to buy probably cannot afford to rent, with median rentals of $325 a week in Auckland.

Alan Johnston, of the Child Poverty Action Group, has worked out that a low-income earner now needs to work nearly 28 hours a week just to pay the rent.

In South Auckland, the Monte Cecilia House is being forced to turn away homeless families because there is no room at the inn. Where do these families end up - in garages or caravans?

The Salvation Army has told the Herald about a family of four paying $200 a week to live in a porch on the side of a house with cardboard as a wall and a curtain for a front door. That sounds like something out of the shanty towns of Brazil or the Philippines. Are we talking about New Zealand?

The ridiculous result of this situation is that taxpayers end up picking up the tab for housing shortages through the health and social welfare systems.

We know children living in overcrowded, unheated and damp housing are at much greater risk of infectious diseases and asthma. We know that overcrowded housing is linked to meningococcal disease, serious skin infections, and preventable lung infections.

However, this information comes from studies looking at families who are living in real houses, not porches. One could assume the porch-dwellers face an even worse health scenario.

We also know that families who cannot afford the rent skimp on basic necessities such as nutritious food, clothing and heating. It is harder for children to do well at school if they are constantly moving because their parents cannot afford the rent.

The Auckland Child Poverty Action Group found that almost a third of students from the poorest schools have moved at least once during the school year. Some students moved many times.

So families living in substandard housing are more likely to get sick, be admitted to hospital, and possibly end up on sickness benefits because of the resulting disability. Their children may end up on the dole because of educational failure.

And then we wonder why we have long public hospital waiting lists and so many people on benefits.

The Government's Budget announcement of an extra $129 million for housing is welcome, but it won't solve the problem. The new funding will provide an extra 500 new homes in Auckland, but there were 3150 applicants on the priority waiting list at the end of April, and the waiting list for the country totals 5057.

Despite the acquisition or building of extra state houses, there will be far fewer state houses next year than before the huge sell-off of the early 1990s.

A ministerial briefing in 2002 noted that after the disposal of 12,500 state houses between 1991 and 2000, the proportion of social-housing dwellings had fallen to the point where it was among the smallest in the OECD.

The briefing papers said that at today's rates of acquisition, there would be an ongoing decline in the amount of social housing (central plus local government) as a proportion of total housing stock.

We can't blame this Government for the sales, so we should give it some thanks for trying to reverse the trend.

But getting families into affordable housing must become an urgent priority for both central and local government. There are predictions that rapidly rising house prices are starting to falter, but continuing population growth in Auckland means there is likely to be long-term shortages of affordable housing. There are also pressures on other areas around the country.

We need the Government and local councils to work together on this. Some councils have indicated they want to move out of providing social housing because it is outside their "core business".

However, the housing shortage is one of the most pressing health problems facing many communities; it needs a solid policy response from both central and local government.

* Dr Gay Keating, of Wellington, is director of the Public Health Association.