That has been strongly denied by Social Housing Minister Paula Bennett, who said funding certainty for existing providers would help them survive, and hopefully expand.
Budget 2016 will include $41.1 million to fund 3000 emergency housing places per year, and comes as reports of desperate people sleeping in cars and garages puts a spotlight on the issue.
The funding follows the first ever review of emergency housing in a field which has been traditionally left to charity.
In a Parliamentary debate last week, Social Housing Minister Paula Bennett referred to the 3000 places as new.
This morning, she said they would likely be mostly existing beds at organisations including Lifewise and the City Mission. The Government is expected to call for tenders for agencies to provide the new places, with contracts expected to be in place by September.
"We are paying for places that we have never paid for before ... I've got organisations that were saying they were going to close their doors because they couldn't afford to keep running," Ms Bennett told Radio New Zealand.
"And I have stepped up and got the funding for them to keep those doors open so those beds are available for people who desperately need them."
The Government had a housing rebuild programme, was freeing up for more affordable housing, and had built $2 million-worth of new emergency housing, Ms Bennett said.
Social housing was at 97% occupancy. There were roughly 500 people on the "wait list" for social housing at any time. Housing NZ was building 580 homes in Auckland, and there would be another 1300 after that.
Green Party co-leader Metiria Turei said Ms Bennett's comments about the new emergency housing funding had given "false hope" to desperate people.
"While it's good that the Government has helped community groups by funding some of the places they were already providing, it's not honest to claim the Government was providing additional support to families."
Recent media stories have interviewed people living in cars and garages.
This morning Labour housing spokesman Phil Twyford said Auckland's urban growth boundary had to go because it has fuelled the housing crisis, and that people would not be forced into bad circumstances if the Government acted.
Twyford said the urban growth boundary created an artificial scarcity of land, driving up section costs. Land inside the boundary is up to 10 times more valuable than rural land.
"Over 25 years the urban growth boundary hasn't prevented sprawl, but it has helped drive land and housing costs through the roof. It has contributed to a housing crisis that has allowed speculators to feast off the misery of Generation Rent, and forced thousands of families to live in garages and campgrounds," Mr Twyford said.
