Manawatū District Council is one local authority that is feeling these impacts.
The council owns 205 public housing units, which are managed by the Manawatū Community Trust, a council controlled organisation, since 2008.
The mainly one-bedroom homes are occupied by pensioners and people living on long-term disability allowances.
However, Community Trust manager Kevin Petersen said their job was getting harder.
"Demand is increasing significantly," he said. "As you would know, the over-65 age group is the fastest growing cohort.
"That's being complicated now by the drop of home ownership, so significant numbers of elderly are not able to have the equity by selling their own homes to buy into units in retirement villages and similar."
The trust has plans in the building consent phase to build an extra 12 units, but Petersen estimated they would need at least 33 more by 2030.
But there was a problem with that.
"It's not achievable. Not on our current funding, and not with the other obstacles which are in our way," Petersen said.
GST and the IRRS an obstacle to more housing
The main obstacle, Petersen said, was their inability to access the income-related rent subsidy.
The subsidy allows housing providers to charge market rates for rent. Tenants pay as much as they can depending on their income, and the Government tops up the rest.
Councils, and any council-controlled organisations, are not allowed to access the subsidy.
Without the subsidy, and to ensure the accommodation stays affordable, Manawatū Community Trust keeps its rents well below the market rate.
But that accounts for lost income for the Trust.
Manawatū District Council mayor Helen Worboys said that meant its resources were spent on improving existing units, rather than the essential task of building new ones.
"Here's a credible trust who've proven their worth and the work that they're doing, and they're passionate about doing some more," Worboys said.
"Why wouldn't you give them the accreditation and let them get stuck into the market and build more?
"Because that's the reality. Then [the] money they do have will go further."
The other main obstacle was their inability to get GST back when they spend money on building new properties.
Councils as landlords: under the microscope
In the midst of the current housing crisis, local government's role as a landlord, is becoming harder than ever.
It is not just the housing shortage. Units constructed in the 1950s - which accounts for a lot of them - are nearing their end-of-life date, and need renewals.
Healthy Homes standards need to be in place, and many properties will require a heat pump put in.
Then add on the fact more units will be needed to deal with New Zealand's ageing population.
But not all councils are deterred, with a survey by Local Government New Zealand showing 30 per cent of councils want to increase their stock.
It remains however, that only a few councils are actually doing so.
One of them is Dunedin which is considering spending either $10 million or $20m of ratepayers money on building new units.
Providing them with the income-related rent subsidy would help them go even further, said Mayor Aaron Hawkins.
"If we were able to do that, then we would have a greater degree of capacity to be able to build more units and create additional supply for people who desperately need it, and we have waiting lists in the hundreds that do."
Hawkins said the city faced another problem.
"The council's policy currently around housing is that it's supposed to break even, i.e. the rent we take in should cover the operating and maintenance of the housing stock.
"The reality is, that hasn't been happening."
So to keep the rents at an affordable price, ratepayers are making it up, where it would normally be the Government in the form of the income-related rent subsidy.
Local Government New Zealand president Stuart Crosby said that was not how it should be.
"This financial burden should not fall onto ratepayers. It is definitely a central government requirement, but we're happy to work with the governments of the day to see what we can provide collectively."
Some councils looking to offload properties
For other councils, the cost of upkeep, as well as healthy home standards, is becoming too much.
Offloading to a Community Housing Provider, which could access the rent subsidy, was an attractive option, and Far North Mayor John Carter said the council was considering that.
"On reflection, we're not sure that we are necessarily the best landlords, and that we may well be better to work together with people in rest homes to ensure that we are getting the best delivery and the best service we can give to our people."
Councils in Porirua and Ashburton are having similar discussions, with the cost of keeping ownership of the property becoming too burdensome.
The Government is not looking likely to change its policy regarding the rent subsidy.
In a statement, Housing Minister Megan Woods said council tenants qualify for the accommodation supplement and there were financial constraints on the subsidy.
In 2018, the Ministry of Housing estimated if all council tenants became eligible for the subsidy, it would cost about $175 million a year.
