Thousands of public housing tenants in New Zealand will receive millions of dollars in compensation and an apology from the government for being wrongly evicted after incorrect meth testing of their homes.

Under the previous government, Housing New Zealand (HNZ) ended more than 800 tenancies on the basis that the houses could be contaminated because methamphetamine had been cooked or smoked on the premises.

Evicted tenants were advised to leave all their possessions behind, and were often barred from accessing state housing again, meaning they had to foot the bill for new homes, bonds, furniture, clothing and household goods.

Some evicted tenants became homeless as a result of their evictions.

HNZ described its old policy as a “conservative and risk-adverse approach” . A May report by the chief science adviser, Sir Peter Gluckmen, deemed HNZ’s low threshold for contamination overzealous and unnecessary. The testing was so stringent that in some cases, tenants were evicted as a result of the drug use of previous tenants.

Gluckman’s report in May concluded the meth tests used were largely unnecessary, unless a house was suspected of being a meth lab, and advised raising the threshold for initial screening tenfold, to 15 mcg per 100 square centimetres.

“There is currently no evidence that methamphetamine levels typically resulting from third-hand exposure to smoking residues on household surfaces can elicit an adverse health effect,” Gluckman concluded. “This means that, because the risk of encountering methamphetamine on residential surfaces at levels that might cause harm is extremely low, testing is not warranted in most cases.”

In a statement HNZ apologised to the thousands of people it evicted since June 2013, and said it was “dismayed at the scale of the human impact of the zero-tolerance policy” and was working to be a more compassionate organisation.

Tenants who were evicted from their homes – regardless of whether they had smoked methamphetamine or not – would be dealt with on a case-by-case basis, HNZ said. The tenant holder would receive up to NZ$3,000 (£1,500) in compensation, which would include costs associated with moving, securing new accommodation and buying new furniture and household goods.

On average there are approximately three people living in each HNZ property.

Many tenants who were evicted under the previous standards are still in debt to HNZ for the cost of decontaminating their homes. Under the new agreement, these debts would be wiped, and prior debts that had already been paid refunded.

‘The scale of this is just huge’

Ross Bell from the New Zealand Drug Foundation said the compensation was too little given the devastation wrought, and said the housing minister, Phil Twyford, had indicated to him more money would be made available soon.

“The country got caught up in this widespread hysteria regarding meth contamination that drove all of the decision making. When experts tried to inject some science and rational thinking, they were ignored,” said Bell, who added that state housing stock that was urgently needed during the housing crisis was also unavailable due to ill-founded contamination fears.

“A lot of people just left their house with all the stuff in in because they were so fearful that everything was contaminated. The scale of this is just huge.”

Twyford acknowledged the hardship experienced by vulnerable tenants unfairly evicted as a result of the policies of the previous National government, and said: “The meth debacle was a systemic failure of government that hurt a lot of people.”

“The approach to methamphetamine from 2013 by the government of the day was a moral and fiscal failure … this led to the wellbeing of tenants being ignored,” he said in a statement.

“Even as evidence grew that the meth standard was too low, and ministers acknowledged it wasn’t ‘fit for purpose’, the former government continued to demonise its tenants. At any time they could have called for independent advice. Our government is choosing to do the right thing.”

Judith Collins, the opposition spokesperson for housing, called Twyford a “fool” for compensating tenants.

“We’ve got people he’s wanting to give compensation to, tax-payers dollars, to people who have allowed their property to be used for methamphetamine smoking or have been doing it themselves or even used it too cook up meth. He is creating a problem,” she told NewstalkZB.

“This was an issue where the methamphetamine epidemic, which is getting worse not better, it was clearly putting some of these people at risk and their children.”