Soaring house prices on the Kapiti Coast north of Wellington are pushing out poorer families and causing big shortages of housing for elderly people, the district's mayor says.
Real estate agents say the new motorway extension has created unprecedented demand in the area.
The mayor, K Gurunathan, said he was called just after Christmas to help a young family of six living in a leaking garage - and he was hearing of other problems caused by rising rents and property prices.
"There's no excuse for children to be in that kind of situation in a country of the wealth that is New Zealand, we are a developed country, children should not be raised in those sorts of situations, that is the point of reference for me."
Mr Gurunathan has called an urgent meeting of developers, social housing providers and welfare groups on 8 February.
The head of a new housing taskforce, Kapiti Coast councillor David Scott, said young families and elderly people were hardest hit.
Real estate agent Ceinwen Howard, who has lived on the Kapiti Coast for 32 years, said the "massive" interest from buyers had caused a chronic shortage of houses for sale.
"We generally have roughly between 1500 and 2000 properties on the market in Kapiti, which is Paekakariki right through to and including Otaki. We are down to 200 listings for all companies. It's chronic."
Houses with rateable values of $500,000 were selling at 50 percent higher, she said. High end houses were being sold for up to 30 percent above rateable value.
At least 90 percent of all sales were to out-of-town buyers. Many were from the South Island - Canterbury and Christchurch in particular. There was a drift from Auckland, interest from people in the Hutt Valley continued, and there were some buyers from Manawatu.
Not all were owner occupiers, she said. "A bit of investment" was happening.
Mrs Howard said Kapiti Coast was turning into a suburb of Wellington now the the motorway extension was close to completion and the four-lane Transmission Gully was due to open by 2020.
Mr Scott said he heard stories every day of people having to move because of rising rents, pushing them further away from Wellington.
He said it was segregating the population into richer people who could afford to live in Kapiti and poorer people who had to move north.