UPDATED 8.51PM: Labour's housing spokesman Phil Twyford is calling for the Government to declare a State of Emergency over the nation's housing crisis.

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Twyford says agencies providing social care are warning that New Zealand now faces the worst level of homelessness in living memory.

It was a social crisis to have 40,000 New Zealanders living rough in utterly unacceptable conditions and the Government needed to take full responsibility.

The figure included people living in campgrounds and entire families squashed into a single room of a shared house, he said.

Twyford labelled it a "social crisis" that needed urgent action.

"I don't really care how they do it, they could tie a cruise ship up at the ports of Auckland, they could build pod houses, convert warehouses - that's why they're paid the big money to work these things out."

In Auckland the average house price is tipped to pass $1 million when QV releases it next house price index figures next month. Spiralling housing costs are forcing people into substandard and overcrowded housing, with many others forced to live rough or in cars.

Twyford said it was time the Government stopped acting like a possum in the headlights and demonstrated the urgency the problem demanded.

National was in denial about the housing crisis and even trying to challenge its own official figures on the matter, he said.

"The National Government seems to think that if you're a pensioner living in a campground because you can't find any affordable rental housing that you've got a home. This just beggars belief.

"Put a roof over the heads of these people."

Twyford said it was embarrassing that international media were picking up the issue and it was not fair that everyday Kiwis had to pick up the slack.

His comments follow a report this morning on TVNZ's Q+A investigating the growing homelessness problem in the tourism hotspot of Taupo, as well as international news reports about New Zealand homelessness in the likes of The Guardian and Al Jazeera.

Building and Housing Minister Nick Smith referred questions this morning to Social Housing Minister Paula Bennett.

She said declaring a state of emergency was not a real solution.

Twyford's comments were negligent and the Government was rolling out emergency housing as fast as it could, Bennett said.

"Well I don't think that Phil Twyford's engaging his brain and he's just come out with state of emergency without actually thinking about what that would mean. I don't want to see tent cities in our beautiful country and those are not the solutions for those that have fallen on hard times."

She said the Government had more than $50 million going towards community housing providers this year.

She also batted away reports Work and Income staff are making it difficult for people to gain accommodation support, saying WINZ staff want to do everything they can to help people in need.

She said what is often not reported are the complex financial situations people get themselves into.

"Where perhaps they're not telling the full story ...you know people want a quick fix but it goes two ways".