Mr Martin said many people were on benefits in Rotorua and there was not enough state housing available, leaving multiple families in cramped conditions under the same roof.
Vicar Alex Czerwonka, from St Luke's Anglican Parish in Rotorua, said there was a need for a homeless shelter in the city and his church hoped to have one established in the next month.
Housing Minister Phil Heatley said a skilled team of investigators had been detecting and dealing with tenants who were "deliberately ripping off the system".
Freeing up the properties had helped people who genuinely needed a state house into a property faster.
"A state house is not an automatic entitlement - and people who deliberately lie about their circumstances are depriving families in real need and receive benefits that they are not entitled to," Mr Heatley said.
The Housing New Zealand investigations revealed tenants failed to declare their income from employment, business interests or assets, or they lived with a partner or sublet their tenancy.
A Dunedin couple running an escort agency from home were among the 312 tenants evicted after lying about their income so they could stay at the property.
The couple were prosecuted for income-related fraud, sentenced to 100 hours' community work, 12 months' supervision and ordered to repay $7500.
Mr Heatley said just 1 per cent of HNZ tenants were rorting the system. It cost the Government $2.4 million a year to run the investigations unit.
HOUSING RIP-OFFS
312 evictions nationally in the past 12 months, 241 in 2011 and 114 in 2010.
120 Housing New Zealand tenants prosecuted for fraud nationwide in the last year
17 evictions were in Bay of Plenty
137 people on a HNZ waiting list in Tauranga/Rotorua as of last month