Nine in 10 people getting the government accommodation supplement are passing the money on to their landlords.
Just 11 per cent of those receiving the welfare payment own their own home, according to Ministry for Social Development figures obtained by NZ Newswire.
Prime Minister Bill English denies a budget move to increase the supplement by up to $80 a week per household from April 1 next year is supplementing landlords, who aren't allowed to just increase the rent when they want.
But Labour leader Andrew Little says that's exactly what's happening and there's fears from some that the increased supplement will become a cash cow for property investors.
Under changes to the accommodation supplement, to be introduced from April 1 next year if National wins a fourth term in September, households will receive between $70 and $305 per week, an increase of up to $80 in some cases.
Just 32,181 people receiving the government allowance as at March 31 this year owned their own property, while almost twice as many - 63,713 - were boarders.
The majority of those receiving the supplement - 189,280 or 66 per cent - are part of generation rent.
Mr English said the increase in the supplement would put cash directly in the pockets of tenants and denied it would be an opportunity for landlords to gouge more money on rents.
"The landlords can't just stick up rents any time they want, although there has been pressure on rents lately," he said.
"Tenants can have other choices."
But Mr Little said landlords can and are putting up rents, with increases for seven per cent across the country and up to 12 per cent in some cities.
"It's exactly what landlords are doing and I know landlords are saying 'you're getting the accommodation supplement so I'm going to put it up'," he said.
"So the PM is just totally out of touch with that."
But Mr Little said the supplement is the "best answer to what is happening right now" with low wages and high rents.
He also called for a review of the Residential Tenancies Act to look at more secure forms of tenancy for renters.
HOW THE ACCOMMODATION SUPPLEMENT IS SPENT:
Renting - 189,280
Boarding - 63,713
Owning - 32,181
Total - 285,175