Demand for social housing has sky-rocketed, increasing by 72 percent in the past two years, according to a new briefing paper.
Briefing papers to incoming ministers have been released today, and in the report to the Social Development Minister, the ministry has revealed the surge in demand for social housing.
The Ministry has listed pressures in the private rental market, population growth and decline in home ownership as key factors.
In some areas, the seasonal labour market also contributed to accommodation shortages, the report said.
"These factors combine to increase numbers needing state/social housing, and also make it more difficult for tenants to exit state/social housing."
The briefings provide new ministers with an overview of their portfolios, setting out the work programme but also identifying any areas where action may need to be taken or where there could be risks.
In the report it said Māori households were over-represented in social housing, making up 36 percent of tenants and 43 percent of the housing register.
"There is a higher rate of economic and social disadvantage among Māori and addressing this in a meaningful way remains a critical priority."
The briefing also said high accommodation costs led to a significant increase in the number of hardship grants.
It said around 130,000 children - or about 12 percent - lived in households that reported a "major problem" with heating the home and keeping it warm in winter.
Housing Minister Phil Twyford said the Government had inherited a mess.
"This is a social and economic disastor for the country," he said.
"It's quite complex, there's a lot of layers to it, and it's going to require bold reforms on a number of fronts, sustained over a number of years."
There was a massive scale of unmet demand, Mr Twyford said.
"We see in the fact the Government has been spending $100,000 a day on motels, the huge demand for emergency and transitional housing, and the blow out in the state house waiting list."
However previous Social Development Minister Paula Bennett said that waiting list blow out is because her government made it easier to get on the register by shifting it out from Housing New Zealand.
According to the briefings, Auckland's housing shortage has also steadily become worse over the past nine years and the city is now short by 45,000 homes.
In the past year, only around half the number of homes needed annually have been built.
The previous Housing Minister Nick Smith insisted his Government had been building houses as fast as it could.
"I think you've got a new Government that is trying to make it look as bad as possible to try and be an apologist for the fact they will not meet the sort of growth rates that National was able to achieve."
Other alarming statististics in the briefings include the high number of Maori who are over-represented in social housing, making up 36 percent of tenants and 43 percent of the housing register.