Government has been told that its use of emergency accommodation to house rough sleepers is not sustainable. In some cases, it is paying private landlords four times the market rent to get people off the streets.
Landlords are charging the Government $300 a night to house homeless people in Auckland who have nowhere else to go.
One Auckland landlord says that rate is relatively cheap because the tenants are difficult, transient and cause a lot of damage.
But beneficiary advocates say rental owners are profiting off homelessness while offering little of the support that public housing provides.
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The Ministry of Social Development (MSD) concedes the situation is not ideal, and says that it only uses costly private rentals when there is no other option.
It comes as housing and welfare ministers have been warned that the Government's use of emergency accommodation to reduce homelessness is not sustainable.
"Too many New Zealanders, particularly families with children, are receiving these very costly emergency supports," they were told by housing officials in a briefing paper last month.
The number of people getting emergency housing support in New Zealand has risen dramatically in the past year, partly because of housing shortages and rising rent costs.
Nearly $35m was spent on emergency housing grants in the last quarter, compared to $10m a quarter a year ago. Most people are placed in government-funded motels but MSD has also sought private rentals to place people in.
At a basic, three-bedroom, furnished apartment in Ellerslie, MSD is paying the owners $2100 a week to provide emergency housing, which includes rent, power and water.
Market rent for a three-bedroom apartment in Ellerslie is $497 a week, and the average power bill for such a home is around $55 a week.
The landlord, Bin Hu, who looks after the apartment on behalf of a company, said the cost was relatively low for what she had to put up with. The rent took into account short and unpredictable tenancies and frequent damage to the property, she said.
"I'm the cheapest," Hu said. "I ask each of the tenants how much they have paid in other places and one [large family] said they had paid $3800 a week."
MSD could not immediately confirm whether it had been charged this amount by any private landlords.
Information obtained by the Herald under the Official Information Act (OIA) showed the median price charged by emergency housing providers in Auckland was $1500 a week. That cost had risen 40 per cent in just three years, when the Government first started funding emergency housing.
"As a taxpayer, I want to reduce this payment," Hu said. "I really want to work with them to bring the costs down."
Auckland Action Against Poverty co-ordinator Ricardo Menendez March said the rent charged by privately-owned emergency housing providers far exceeded that paid to legitimate, experienced housing providers.
"You've got proper transitional housing or Housing First or other models that are receiving far less money, whereas these private landlords - that are not providing any formal wraparound support - are getting huge, huge amounts.
"People are realising there is an avenue to make lots of money from peoples' homelessness."
MSD regional commissioner Mark Goldsmith said the ministry used a range of suppliers for emergency housing: "This particular supplier is one we rarely use unless we have no other option left, for example in the case of large families."
Emergency housing is one part of a growing Government effort to reduce homelessness, which includes more transitional housing, greater funding for permanent housing through Housing First, and greater supply of state housing.