Only 28,000 homes insulated through the project had been rentals, according to the Citizens Advice Bureau (CAB).
Under the project, 33 per cent of ceiling and floor insulation costs, up to $1300, was provided to owners whose homes were built before 2000.
Community service card-holders and landlords with tenants who were community service card-holders qualified for 60 per cent of funding towards insulation.
And while some landlords had responded well to the project, others had failed to take advantage of the subsidy, Mrs Kaipo said. These landlords tended to only invest the bare minimum in their properties.
Vulnerable families living in such homes were forced to put up with cold, damp homes.
Andrew Hubbard, CAB national research and policy adviser, said too many Kiwis fell ill due to cold, damp or mouldy living conditions. Those who suffered the most were families with babies or small children, he said.
"We need to urgently implement minimum standards for heating, insulation and weather tightness to ensure a decent standard of housing for all New Zealanders," Dr Hubbard said.
An expert group on child poverty, appointed by Children's Commissioner Russell Wills, has also advocated for a housing warrant of fitness scheme, as research shows high rates of poverty-related child illnesses, such as respiratory-related infections, could be reduced by making houses dryer and warmer.
But the umbrella body for property investors has warned such a scheme could result in higher rents.
Andrew King, president of the New Zealand Property Investors Federation, said many landlords found the Government's subsidised insulation scheme too expensive.
For example, a standard three-bedroom would cost about $3000 to insulate through the Heat Smart scheme, after the $1300 subsidy, he said.
Landlords could do it themselves for about half the price, Mr King said.
Regulation around insulation and heating would be a better alternative, he suggested.
-APNZ