Labour says money the Government got in dividends from Housing New Zealand (HNZ) should go into fixing its "unliveable homes".
The Government took $90 million from HNZ over the past year, and even spending a third of that would help better the housing stock, Labour leader Andrew Little says.
"This is a disgrace at a time when children like Emma-Lita Bourne are dying in homes because of damp and cold while others such as Iriah Marama are suffering from respiratory diseases caused by black mould.
"For just $35 million, all of the state housing stock could be brought up to a liveable standard, but instead the Government takes almost three times that in dividends each year," Mr Little says.
Letters released to Labour under the Official Information Act show the Government repeatedly pressured HNZ for dividends, including one for an immediate payment of $6 million higher than anticipated.
Mr Little says the average state house needs $600 work of repairs while the Government gets $1500 from each house in profit.
But Finance Minister Bill English says the Government is fixing state homes.
"Any house that needs [to be] repaired gets repaired. So there isn't really a problem with a shortage of cash to repair the houses.
While there had been some "tragic cases" there is generally "quite a bit of complexity, it's not just about house repairs".
Prime Minister John Key blamed the previous Labour government for the state of the houses.
"It is a joke for the Labour Party to come here and talk about this. They ran the housing stock down. They should hang their heads in shame."
Mr Key says 280,000 homes were insulated through the Warm Up New Zealand programme, of which 48,000 were state homes.