Greensmith's mould-blackened Wadestown flat was so bad that spores grew all over his bedding, he says.

The race for student flats is on, no matter how cold, mouldy or squalid.

Landlords have been accused of price gouging desperate renters, with some even running auctions as groups of up to 60 students vie for scarce rooms in a cut-throat market.

Fourth-year Victoria University law student Ted Greensmith, 21, says a housing crisis has gripped the capital, and slum landlords are exploiting students.

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Greensmith has spent the past two years living in cold, mouldy, damp "depressing caves" – most recently in a windowless, unventilated interior room on Victoria St in the CBD.

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The smelly room in a converted office block was plagued by mildew and triggered breathing problems, and he was paying $180 a week for it.

As the new academic year loomed, it was common for mass viewings of up to 60 people to turn up for the same flat, many of them armed with thousands of dollars in cash bonds to help secure the landlord's or agent's favour, he said.

Landlords sometimes ran "auctions" between competing tenants to squeeze out a few extra dollars in rent from the highest bidder.

"There's a massive shortage of accommodation for students that's not making them sick."

Greensmith said the Residential Tenancies Act was toothless, outdated and provided "loopholes for slumlords" to exploit a highly competitive market.

Under plans to strengthen the act, all tenanted properties will require floor and ceiling insulation by mid 2019, while social housing that receives government subsidies will require insulation by July 2016.

Greensmith backs a full rental warrant of fitness regime, which is not provided for in proposed amendments to the act, a process that is still under consultation.

Victoria University of Wellington Students Association (VUWSA) president Jonathan Gee said the rental spike hit in January and February, when demand outstripped supply.

"With more students looking for flats than what's actually available, students generally settle on what they can get – unhealthy, mouldy flats that aren't regulated by a set of quality conditions that hold the landlord accountable," Gee said.

He cited reports from the association's advocacy service that said it was common for students to live in their cars in car parks while some were homeless during the year and used the campus recreation centre for washing.

"Students sleep on their friends' couches or on the floor and move from place to place until the mid-trimester, when the rental boom dies down a bit."

He said student allowances of $175.86 a week were not enough to cover average weekly rents in the capital, which ranged between $185 and $200.

However, the situation was unlikely to ease, with the university aiming to double its student numbers over the next 20 years, including international students, from 15,000 to 30,000.

University campus services director Jenny Bentley said the extra pressure on a tight rental market had been addressed in its strategic plan.

"As part of our campus development planning, we will be looking at what future accommodation options will be required. This might be a mix of more halls of residence, independent living choices, and working with other accommodation providers in the city to make sure the right options are available."

"We have invested significantly in recent years to provide more accommodation for our students."