In a shocking admission, Work and Income say it has been using tents to house the homeless.
Figures given to 1 NEWS under the Official Information Act show in the last year 20 families have asked for hardship grants through Work and Income to buy a tent to live in.
Work and Income Deputy Chief Executive Service Delivery Ruth Bound said the practise is extremely rare, "so rare in fact that our system does not record the grants as a separate sub-category of hardship grant".
She says it agreed to fund the tents "in an effort to support its clients choices" and did not rule out supplying more than the 20 it could identify.
"Our case managers help clients with one million requests for hardship grants a year and were able to recall around 20 instances," Ms Bound said.
The Government claims it only learnt of the practise when 1 NEWS raised questions and has now ordered Work and Income to stop supplying tents.
"It's not ok for the government to be supplying tents. It might have been acceptable under the past government it's not under ours," said Housing Minister Phil Twyford.
"We're pulling out all the stops with emergency and transitional housing, building thousands of extra state houses, and if people are homeless and don't have anywhere to live we will do our absolute best to find somewhere for them," Mr Twyford said.
National's Social Development spokesperson, Louise Upston, said she too had no idea that special needs grants were being used to buy tents.
"I can only assume these are decisions made by frontline staff who are doing their very best to help people in need," Ms Upston said.
The number of families on Housing New Zealand's waiting list has almost doubled in three years to over 6,000, while there have been one million requests for hardship grants in the last year.
Ricardo Menéndez from Auckland Action Against Poverty said that it demonstrates we're at national emergency levels.
"The fact that people are having to ask for tents because there is no other option just shows that chronic levels of underfunding for housing sector are starting to affect a large portion of people," Mr Menendez said.
Phil Twyford said, "There's every likelihood the homelessness will get worse before it gets better."