Wellington, Dec 9 NZPA - Housing New Zealand is being accused of blocking applicants from getting state houses using its new advisory service.

Labour MP Moana Mackey made the allegation when HNZ chief executive Dr Lesley McTurk and chairman Pat Snedden appeared before Parliament's social services select committee today.

HNZ has been trialing its options and advice service in eight of its neighbourhood units -- Whangarei, Panmure, Onehunga, Manurewa, Hamilton, Manawatu, Linwood, and Timaru. A press release about the trial said the goal was for HNZ to assist everyone that comes through its doors, rather than only those it can house.

House seekers would be told about options including state housing, homes available in the private sector, the government services available to help with accommodation costs, and home ownership.

Ms Mackey said she knew of cases where people were turned away after the options and advice service discussion and not given an opportunity to be assessed to see if they would qualify for a state house.

"I want to make it clear it is not the concept of the service that I think is the problem. But I think by putting the options and advice service before a needs assessment process some of the most vulnerable people are falling out of that system."

People in desperate straits could be leaving with no home when they were entitled to a state house.

She questioned whether the goal was to keep the waiting list from growing.

Mr Snedden said her "feedback" would be taken on but added: "Blind simplistic approaches to the way we run the operation is not necessarily the best, longterm, sustainable way of getting the right result."

HNZ would follow up with emergency housing and social organisations which Ms Mackey said had raised concerns.

"Our job is to actually do the right thing by the people, that's our job. And where we have got an allocation of a scarce resource, finding people options where sometimes a state house is not immediately available to them is our job also if we can."

He said it would be a "significant worry" if high need people were being turned away and he doubted staff would be doing that. Another Labour MP, Phil Twyford, raised concerns about HNZ's involvement in a leaky west Auckland apartment block.

Six years ago Pepperwood Mews was built by a private developer after HNZ said it would rent them for 10 years. After structural and leaky problems HNZ rehoused its tenants but Mr Twyford said it should take some responsibility for the position the people who bought the 32 units found themselves in.

Mr Twyford said HNZ was involved in the design and construction of the building.

He accused HNZ of "hiding behind the legal fiction of a public private partnership and in the process you are hanging out to dry 32 investors".

Dr McTurk said HNZ had nothing to do with the transaction between the developer and new owners. However, HNZ was having ongoing talks with the unit owners.

Mr Snedden said he understood Mr Twyford's point.

"There are conversations happening at the moment of a commercial nature with the players in this drama and I think they need to be respected. To play them out in front of a select committee here wouldn't be the way to do it."