The youth justice system will be undergoing a major shake-up in July, but the Children's Ministry warns reducing the number teenagers being detained in custody is "challenging and uncertain".
From July, 17-year-olds will appear in the Youth Court instead of being treated as an adult, but documents released to Newshub show youth justice residences are operating "close to full capacity".
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The documents also show Oranga Tamariki must build up new residential homes in order to meet the increased demand.
Joseph, whose named has been changed for privacy and legal reasons, has spent years in and out of youth facilities for unruly behaviour he's not proud of.
"Smoking drugs, drinking, parties, fights, mischief... stuff like that," he told Newshub.
The 16-year-old is one of hundreds who pass through the youth courts every year.
Oranga Tamariki general manager of youth justice residences, Ben Hannifin, says the children it deals with have little or no family support.
"They're coming from broken homes. Homes where they've experienced trauma and family violence [and] homes where they don't feel safe."
Official statistics show while Youth Court appearances have dropped by more than 40 percent, the custodial remand rate has continued to increase.
It means space is becoming an issue at the country's four youth justice residences because children who have not been found guilty yet are spending time inside.
The Ministry wants to build more community-based remand homes as a result, which will also provide an alternative to police cells and motel units.
But only 17 remand placements are available at present and building them is a "challenge."
"Communities on the whole accept the fact environments like this still exist but we still need to build them in a community that might not necessarily want them on their back door," Mr Hannifin says.
The Ministry hopes to open new homes in Auckland and north Waikato by July, and expect the rest will be completed within two years.
Joseph has a few weeks left in Palmerston North's remand home. Tucked away on a quiet suburban street, the secure windows are almost invisible to the naked eye.
While residents get supported through programmes like drug and alcohol courses, they also have access to aspects of "normal life" like watching a movie on Netflix or battling it out on Fortnite.
Life has changed for Joseph since being in a community home and hopes to one day train as a personal trainer.
"Hopefully get my own house, live independently, get a job [that] helps me pay all my bills and things like that."
"Police cells need to go" - Children's Commissioner
While the change of tack is the "right thing to do," Children's Commissioner Judge Andrew Becroft believes July 1 is a good chance to rule out using police cells to detain young people.
"The psychological risks are enormous. We play with fire when we put young people there," he says.
Oranga Tamariki hopes to rule out cells as an option one day, but admits it's a work in progress.
"Our priority is to reduce that which we've done successfully the past year and a half and that will be our continued priority," Ben Hannifin told Newshub.
Judge Becroft believes it's the "best chance" to stop young offenders continuing a life of crime.