State housing provider Kāinga Ora is phoning 6000 tenants to apologise after many received letters saying their rent would go up.
That's despite the government putting a six-month freeze on all rent hikes on 25 March due to the fallout from Covid-19.
In a written statement, Kāinga Ora said most of the letters were mailed out weeks before that announcement, but admits 57 were inadvertently sent after that date.
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Spokesperson Paul Commons said the agency was apologetic and had cancelled the increase for all tenants.
"We have written to all tenants to apologise, and inform them the notified rent increase will not be happening. Where tenants have already been charged their new rents, they will be refunded as soon as possible."
About half of the 6000 affected tenants had been phoned with a personal apology and the rest would also receive a call, Commons said.
"To date, they have all been understanding and we appreciate their support."
Speaking to media, Prime Minister Jacinda Ardern acknowledged that the "automated letter" would have been distressing to receive.
"That was an error. That should never have happened," she said.
About 59 percent of the rent increases were for less than $5.