A couple running an escort agency from home were among the 312 tenants evicted from their state house after lying about their income so they could stay at the property.

The Dunedin couple were prosecuted for income-related fraud, sentenced to 100 hours community work and 12 months supervision and were ordered to repay $7500.

An Auckland couple were prosecuted after they sublet their state house for a year and lied about their income for four years. They denied subletting the house - but an investigation found they were living in Palmerston North, where their children were enrolled in school.

These cases were just two of the 312 state house tenancies Housing Minister Phil Heatley said had ended in the past year, after the tenants lied about their income and living circumstances.


He said the Auckland and Dunedin couples were part of the minority who "took the mickey out of the system".

North Island fraudsters made up 285 of that total - while only 27 state house tenancies were found to be fraudulent in the South Island.

Most of the fraudulent activity to gain a state house - 195 cases - occurred in Auckland, where rental property prices are among the highest, coupled with a shortage of affordable housing for low income families.

The rate of fraud in securing a state house has risen. 709 tenancies were ended in the last year due to fraud, with 2011 seeing the largest crackdown on illegitimate state home dwellers.

Another 594 cases were under investigation.

Investigations by Housing New Zealand revealed tenants failed to declare their income from employment, business interests or assets, or they lived with a partner or sublet their tenancy.

"Housing New Zealand has worked hard to identify and remove tenants committing fraud and to make sure those most in need are assisted for as long as they have that need," Mr Heatley said.

"It's very important that we not only end [fraudulent] tenancies, but also recover the taxpayer-funded rent subsidies that people received by lying about their circumstances."


He said there were a lot of people "dobbing in" those using fraudulent means to secure a state house.

"The reality is we're not putting up with it any more - we're catching them, and by publicly advertising the fact we're putting pressure on those who might try it on."

Housing NZ have strengthened their investigations team by increasing the number of staff investigating fraud in state housing from seven to 17.

It costs the Government $2.4 million a year to run the investigations unit.

Mr Heatley said one per cent of Housing NZ tenants were rorting the system.

"There's no doubt that this has been around forever - there are a small minority of people in state houses who have been undertaking all sorts of scams."