MSD has been ordered to wipe the debt of a seriously ill beneficiary who used a wheelchair and was forced to live in his car on and off because the agency didn't think his situation was an emergency.

After helping him to get motel accommodation, MSD insisted he pay back the $10,000 it cost even though he had no way of ever doing so.

The Social Security Appeal Authority reviewed the man’s case in September 2017 but only delivered its decision last month. It concluded that leaving a man with a potentially fatal condition to live in a car was incompatible with his human dignity and the values of New Zealand society.

It said the man regularly pleaded for MSD’s help and he was homeless through no fault of his own, because it was due to a lack of affordable housing. The authority also said any suggestion the man could afford to pay back the special needs accommodation grant had no connection with reality.

Advocacy group Auckland Action Against Poverty helped the man get his case reviewed. Spokesperson Ricardo Menendez March said that instead of help, MSD burdened the man with debt.

"This is somebody who was failed by the social agencies and who was desperately seeking somewhere to stay because he needed to take medication and his medical conditions meant his life would be at risk if he was to sleep in his car or on the streets.

"Work and Income, instead of providing assistance, gave him a $10,000 debt.

"He had a very visible health condition, there is no excuse for the case managers to have not picked up that this is a man who clearly had specific needs.

"No one should be sleeping in their cars or in the streets, but this is somebody who particularly needed somewhere warm and dry to spend his nights.

Mr March said his treatment was completely unacceptable, callous and cruel.

"This is a complete failure by MSD to provide the assistance they’re supposed to provide."

Mr March said the man's case was one of many.

"This is not history. This is ongoing. This is something that is still happening, despite the change of government. We’ve still got people who are faced with recoverable advances.

Mr March said about 3000 people in a period of three months required emergency housing this year. He said hundreds are slapped with a debt for sometimes arbitrary reasons such as failure to search for suitable accommodation.

He said the appeal authority’s decision had political implications.

"At the very least, I would expect MSD to wipe the debt of all people who were put in an emergency housing situation.

"Some of these people are carrying a debt for the rest of their lives."

Minister for Social Development Carmel Sepuloni agreed the man was owed an apology. She said people shouldn’t have to battle to have their debts waived.

She said, under her watch, MSD has more empathy.

"I think that it was unacceptable. To state this his situation was not an emergency situation is, in my mind, incorrect."

"I will be speaking about this with officials," she said.

MSD service delivery deputy chief executive Viv Rickard said it was pretty clear the man wasn’t treated appropriately.

"We probably could have dealt with it better in terms of looking after him and ensuring there wasn’t a debt.

"I’m not trying to hide from that. As soon as I read the circumstances, I thought - this is not how we want to be.

Mr Rickard said the man was dealt with according to the rules and guidelines of the time.

"How we deal with things today is a lot different."

He said that these days most grants given under special needs are not made recoverable.

Mr Rickard said he has started to make attempts to contact the man to apologise.

He said he currently knew of one other case which was a similar situation.