The Housing Minister was warned by officials that new standards to rental properties would likely lead to rent increases and fewer rental options.
In a regulatory impact statement prepared for the Ministry of Housing and Urban Development, Housing Minister Phil Twyford was told it was "likely that landlords will increase the rent they charge a tenant".
The document also warned the Minister that given the current skills shortages in the construction sector, there is a risk that "industry capacity could limit the ability for landlords to meet their obligations".
Those new obligations, which will become law by mid-2019, include landlords having to provide a living room heater, an extractor fan in the kitchen and bathroom, better insulation, a ground moisture barrier, adequate drainage, as well as draught-stopping tape.
ACT leader David Seymour said it's concerning that, in the middle of a housing crisis, the Housing Minister has "decided to make it harder for those people who provide housing".
Mr Seymour's comments reflected those of Mike Butler, spokesperson for tenancy advocacy group Tenancies War, who said landlords will now be forced to absorb the new costs, raise rent prices or sell their properties, leaving fewer options for renters.
Mr Twyford has defended the new standards, saying they're about "pulling up the bottom of the market".
He said two-thirds of rentals already have ceiling and under floor insulation, but 200,000 households don't: "We're preventing the bottom of the market undercutting decent landlords".
"The bottom line here is the cost of doing nothing is far too great for us as a nation," he said on Twitter. "We cannot afford to send 6000 children off to hospital every year with health issues due to cold and damp houses."
The new rental standards have received some support. New research from Otago University says poor housing conditions are responsible for $145 million in annual ACC claims and hospitalisation costs.
"We are hopeful the guidelines will assist in helping to turn around the type of preventable health costs identified in this latest research," University of Otago Professor of Public Health, Philippa Howden-Chapman, said.
The study found that homes that are damp or mouldy cause more than 35,000 nights in hospital with an associated cost of around $35 million.
It also found a total of 32 percent of homes in New Zealand report problems with damp or mould.
But Mr Seymour argued that the Government is "pushing through changes that will reduce the supply of properties and increase housing costs even further".
"The cost of complying with these new rules have to fall somewhere. Either tenants will pay higher rents, taxpayers will pay more in rent subsidies, or properties will be withdrawn from the market completely."
Mr Twyford said research showed that the maximum cost for landlords would be around $7000. This, he said, assumes a three-bedroom home that doesn't currently meet any of the standards, which he said would be a "small minority".