The National-led Government allowed state tenants to be evicted over dubious meth tests to "bring down public confidence in public housing", it has been claimed.
Earlier this year a report from then Chief Science Advisor Sir Peter Gluckman found there was no evidence homes in which meth had been smoked were harmful to live in.
About 300 families living in Housing NZ properties were evicted after traces of meth were found in their homes so they could be decontaminated. All up nearly $100 million was spent, much of it needlessly.
"This has been the biggest scam New Zealand has ever seen," Ross Bell from the New Zealand Drug Foundation told Newshub in May.
After the report Housing NZ upped its standard from 1.5mcg per square 100cm to 15mcg.
"I'm not certain whether the Government itself knew the levels were too low, but it was certainly convenient for them to proceed along the line of trying to ridicule state tenants and bring down public confidence in state housing," Salvation Army policy analyst Alan Johnson told The AM Show on Thursday.
He said Housing NZ may have used dodgy meth test results as a "pretext" for evicting tenants so the homes could be sold or demolished to make way for new developments.
"As soon as some contamination was found it was assumed you were responsible and you were held to account and thrown out. It was so unfair."
Housing NZ has about 4000 fewer homes in its stock now than it did in 2015. The present Government, which took power in September last year, has plans to build thousands more - with Housing NZ borrowing billions to pay for them.
Housing NZ's own report into its handling of the "moral panic", as Mr Johnson calls it, is due out at 9am on Thursday.
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Mr Johnson says the least the Government and Housing NZ could do is wipe the slate clean and let them back on the waiting list for another state house.
"Without any evidence they are responsible for that, they certainly shouldn't be held to account for it."
Some compensation, at least to cover ex-tenants' costs, should also be considered, he said.