Housing New Zealand will be asked to consider changing its policy so offenders on bail or parole can stay in state houses.
The government has ruled out building a new mega-prison, but is still considering what it will do to contain the country's burgeoning prison population.
Justice Minister Andrew Little said Housing New Zealand had a very blunt policy that it would not allow people on bail or parole in the houses, and that policy should be changed.
He said for some offenders, whose families lived in state houses, that would be the most stable and secure environment for them and the community.
"It just seems wrong that just because it is a Housing New Zealand house that an alleged offender in that situation should be denied that opportunity."
But National's housing spokesperson Judith Collins was opposed to the idea.
"If you go and bail a violent offender back to a home where he has been violent, you are actually putting a lot of people at risk."
Ms Collins said the policy change could mean violent offenders got preference on the social housing list over families who needed a home.
Housing Minister says there's no blanket ban
The Housing Minister Phil Twyford said Housing New Zealand does not have a blanket ban on people on bail or parole, but he did want to see if anything else was happening informally.
"There is serious issue here, people coming out of prison need to ideally go into secure, good housing that will support their rehabilitation."
He had no details, for example, about whether there were certain practices by Housing New Zealand staff, but he and Mr Little have sought advice.
"Whether in fact there may be some practical or unintended issues that get in the way of people who are coming out of prison or on bail getting decent housing."
Housing New Zealand said people in need of public or state housing were first assessed by the Ministry of Social Development.
The agency would not be interviewed, but released a statement saying it would house, and always has housed, people on remand or bail if they were existing tenants or a family member or friend of an existing tenant.
There also had to be space in the home and it had to meet any requirements set out by the relevant agencies, such as Justice or Corrections.