The impact of rising sea levels on communities is "like a slowly unfolding red zone", according to Parliamentary Commissioner for the Environment Jan Wright.
In her latest report on the impact of sea level rise, at least 9000 homes across the country were identified as lying less than 0.5m above spring high tides.
Dr Wright warned central government's current direction and advice to communities on the problem was simply not up to it.
It was certain the frequency of coastal flooding would increase as the sea rose, she said, and areas of low-lying coastal land that currently flooded during storms or king tides would experience more frequent and severe flooding.
Auckland, Wellington, Christchurch, Napier, Whakatāne, Tauranga, Motueka and Nelson would all feel the effects - but none more so than Dunedin.
"Engineering options there may work a bit for a while but they're not really a long, or even a middle term option and there are many houses there in a fairly impoverished community, some of them, who are going to have to move somehow," she said.
"So we need to be thinking about this, there's going to be people wanting compensation because it's not their fault."
Dr Wright said the problem would become pressing for houses at levels below half a metre in the next 50 years.
"Think about somewhere like South Dunedin. Homes there for some of those people will become uninsurable and then ultimately uninhabitable, but doing something about it is also going to cost money because there would be a very strong case for some sort of assistance, some sort of compensation. It's a little bit like a slowly unfolding red zone."
Dr Wright took the unusual step of recommending Finance Minister Bill English start planning for the financial fall-out from the rising sea levels, which she said would be costly.
One suggestion was a fund in the style of the Earthquake Commission that collected levies from insurance policies, with the fund building up over time.
Mr English, however, said the government was not intending to put money aside for any future demand from a rising sea level.
He said it had more pressing issues, and he thought people in South Dunedin would be reluctant to up sticks and move on the basis of what he described as "speculation about the sea level rise".
"It's an area where there's inherent uncertainty, some people saying there's going to be significant sea level rise, some evidence that there might not be much, or there's been a bit so far. You know we're focussing on reducing emissions."
Mr English said it was another report that indicated there were risks ahead for the country.
"The government's dealing with all sorts of risks all the time of which this is one, it's a bit speculative, there's others that are more immediate and more costly."
He described it as a report from a statutory officer with a pretty sound scientific base.
Meanwhile, Greenpeace executive director Russel Norman said the government was not taking the problem at all seriously.
He said the government constantly told the country it was too expensive to seriously cut New Zealand's greenhouse gas emissions.
"What this report shows is that it's much, much more expensive if we don't cut our emissions working with other governments, and we get dangerous climate change and sea level rise, it's going to cost us many, many billions of dollars."
Analysis from the Insurance Council has shown the replacement costs of assets located between 0.5m and 1.5m from mean high tide levels would be between $3 billion and $20 billion.