Auckland councillor Chris Darby has asked council officers to investigate the practice of converting garages into so-called "utility rooms" where families desperate for accommodation are sleeping.
A Herald expose found dozens of property listings featured conversions termed "utility rooms", which were not consented and could not be advertised as bedrooms under the Building Act.
The Act says bedrooms must meet guidelines for habitable spaces, and says sleeping areas must be insulated and damp proof; and have adequate light and ventilation, among other factors.
Despite that, a number of real estate agents approached by the Herald advocated renting the utility rooms as bedrooms, and some even staged them with beds in-situ.
One agent said a garage had previously been rented for $300 a week, and that while it would be against the Residential Tenancy Act to have a formal tenancy, a landlord could treat the tenants as "flatmates".
Investors spoken to said the garage conversions "added value" to a sale, and that it was well-known that families would sleep there, particularly in South Auckland.
"If they choose to make it a bedroom that's entirely up to them," one investor said.
The practice was slammed by critics including Green Party co-leader Marama Davidson, who said deliberately getting around council rules to make money was "nothing short of exploitation".
"It is not acceptable for people to be sleeping in cold, uninsulated, poorly ventilated spaces – especially children," she said. "This practice preys on vulnerable people desperate for a roof over their head."
Auckland Council's manager of regulatory compliance Steve Pearce said if the council found the rooms being used as bedrooms it would prosecute - but it rarely did because the problem was not reported.
Would you live here? Garage renos aimed at vulnerable tenants
Rogue landlord: Record $180,000 fine after nearly 200 complaints
City of Sales: Inside look at Auckland's property investors
Darby, the chair of the council's planning committee - which includes housing, said he read the article and was "alarmed".
"If people are capitalising on the vulnerability of people who are in dire need of housing but finding themselves living in living spaces that they assume are legally established - and they're not - it opens up the need for the council to investigate this further," Darby said.
Darby said when he was door-knocking for the last election he came across two instances of the rooms.
"In both the elderly parents were living in the garage with adult children living in the warm house. One had internal connection to bathroom etc but the other was nothing much more than a tin shed," he said.
"If this practice is rife, as it appears, then I will be asking staff what tools and methods they are using to uncover it. I don't expect the answer to be a passive reliance upon complaints."
Darby said he also thought there should be a follow-up with the Real Estate Authority, which licenced and regulated agents.
"If it is as blatant as licensed agents - who are bound by their professional body - openly suggesting that their purchasers and vendors don't need to abide by the law, that troubles me."
On Friday, Real Estate Institute chief Bindi Norwell said the organisation had heard anecdotal reports of some agents and property managers marketing utility rooms as an extra bedroom, however it did not condone the behaviour.
She added that agents could not mislead a customer or provide false information.
"REINZ does not support or condone illegal behaviour by its members be they real estate agents or property management members if it is in fact a clear breach of the Housing Improvement Regulations.
"What it does highlight however, is the shortage of rental accommodation across the country, and also the overall lack of housing supply in some areas, which is something that needs to be urgently address by local and central Government."