Social Housing Minister Paula Bennett says people declining social housing for unacceptable reasons are holding up others from getting into homes.

Social housing applicants will be taken off the waiting list for three months if they decline even one property for insufficient reasons, Social Housing Minister Paula Bennett says.

Opposition parties have criticised the crackdown as "dog-whistle politics" and accused Bennett of targeting the poor instead of addressing the housing shortage.

Bennett has confirmed a chance in policy regarding social housing applicants, saying some people were being "unrealistically picky" when offered a place to live and clogging up the waiting list.

"We actually pay hundreds of millions of subsidies for people to be in homes, and on the waitlist we've got people who are really desperate and we want to house them as quickly as we can."

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Cabinet had agreed to tighten the number of unreasonable rejections of a home before a person would be removed from the social housing register, from three to one.

Of the 10,000 social housing offers made last year, Bennett said nearly 3500 had been declined, with 414 of those for "unacceptable reasons" such as wanting a garage or a bigger backyard.

"Certainly, one I heard is that they didn't like that there were children playing out the front and on the sidewalk and they didn't want to live around children."

She said each case would be assessed on its merits, and acknowledged that most people who declined a home did so for a good reason, such as health, safety or security concerns.

Officials were developing guidelines to ensure state housing staff were clear about what reasons were not sufficient.

"It has been quite clear to date, but we just want to make sure that there's real clarity for those staff that are managing it.

"There's always discretion because we're dealing with a whole bunch of individuals with really individual circumstances."

Social housing applicants would also be required to name a minimum of three suburbs they could live in, up from one previously.

Bennett said the expansion of possible housing locations would only apply where it was "geographically possible and reasonable to do so".

Children who were already at schools in a certain area would "definitely been taken into account", while connections to a job would also be considered if someone was unable to commute.

Green Party co-leader James Shaw said the crackdown was "dog-whistle politics from a politician who has built a career on blaming poor people for government failures".

"This could see people who have disabilities, people with sick children, elderly people getting chucked off waiting lists because they've declined a house for unsuitable purposes."

Labour housing spokesman Phil Twyford said Bennett was "throwing red meat" to National Party voters who demonised the poor, instead of addressing an acute housing shortage.

"There are people living in garages and caravans, there are 1000 fewer state houses since National came to office, and what does she do?

"She picks on a problem that is very small in scale but that casts state house tenants in the most unflattering light."

While "no one in their right mind" thought tenants should be able to turn down housing for frivolous reasons, Twyford said the change was "simply politicking" rather than something that would make a difference.

Community organisation Lifewise, which provides support to the homeless, encouraged Bennett to reconsider the Government's plans and said further tightening of the rules would place more vulnerable people at risk.

"Rather than further rationing state housing, we need both a significant investment in new housing suppliers and funding to enable people to access private rentals," Lifewise general manager Moira Lawler said.

Bennett said the changes would come into effect in January, following consultation with social housing providers.