Prices in the main centres are forcing people back to regions where they end up living in old buses and cow sheds, it has been claimed.
"There was a time when people only came back home to bury their loved ones, but now they're coming home from Auckland and Christchurch," Ricky Houghton, chief executive of Northland's Korowai Trust, told The AM Show on Thursday.
"We're facing people living in the most horrible living conditions. Their quality of life is something you'd expect to see from somewhere out the back of Bangladesh. They're living in buses, cow sheds, condemned housing, overcrowded conditions - and regrettably, it's getting worse."
Mr Houghton's claims come after Newshub released figures showing the Government is spending more than ever on emergency accommodation. In the six months to June, $17 million was spent on grants to get people into motels and $44 million on providing temporary accommodation.
"We are spending more than ever before on special needs grants and motels - that's how bad it is," Housing Minister Phil Twyford admitted.
Ricardo Menendez-March of Auckland Action Against Poverty says both National and Labour have failed the country's most vulnerable.
"What we've got at the moment is a shortage of state homes," he told The AM Show. "I think it's a disgrace that there's about 1000 empty state homes."
That number's actually about 1400, with many deemed unliveable. Mr Menendez-March says we're at a point where any state home would be better than the alternative.
"What they need is either money being put in so they're liveable, or just people living in there. I don't think it's acceptable."
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Both he and Mr Houghton say more state homes need to built as soon as possible. Mr Houghton says rules and regulations are getting in the way of the market doing its bit to help.
"We need a state of emergency to relax council compliance costs and allow us to make sure that we rebuild and repair, and develop housing - obviously up to the building code - but we don't have to go through all the compliance issues."
Even then, he admits, some just simply can't afford to buy or rent on the market.
"Eighty-five percent of some of our community are on some form of benefit, 37 percent are single parents. The average income is $21,000 - if you look at the national poverty line of $29,000, we're a third below that."
The previous National Government in 2016 budgeted $2 million a year to spend on putting the homeless in hotels. By the following year, it was spending six times that every three months.
Mr Menendez-March says while 90 percent of that is grants, 10 percent of it is supplied as a loan - and has to be paid back.
"Work and Income considers they made themselves homeless or because they're doing anti-social behaviour - but those sort of criteria are very loose."
There are presently nearly 9000 families on the waiting list for a state home, up 56 percent in one year.
The Government has plans for 6400 new state homes over the next four years, more than half in Auckland. Housing NZ will have to borrow $2.9 billion to fund them.