Fire and Emergency New Zealand crews have now contained a fire at the City Garden Lodge in Parnell, Auckland.
Assistant Commander Gary Lane said crews were first alerted to the incident just after 4.30pm by the building's fire alarm.
Fire and Emergency subsequently received multiple 111 calls.
"At the peak of the fire there were 16 fire trucks in attendance. This evening 10 crews remain on site, alongside a number of support vehicles," Lane said.
"Our crews have been using a ladder truck to pour water on the fire and this seems to have knocked it back well.
"The fire is now contained but crews will remain on standby overnight."
Approximately 10 people were evacuated, police said. No injuries were reported.
Police said there are no concerns that anyone remains in the building.
Local MP David Seymour was at the scene, and told RNZ the fire was a tragedy.
The lodge had some long-term boarders, he said.
"These are people who often don't have a lot."
Some may have lost all their possessions, and were being helped to find alternative accommodation, said Seymour.
"There's also a big flat of younger people who actually gave food and clothes to a lot of the people there."
Police earlier said one person was arrested after they were called to a "disorder" at City Garden Lodge, in St George's Bay Road, just after 4.30pm, but the person has since been released without charge.
Residents told RNZ they'd witnessed troubling behaviour from residents of the lodge.
Seymour acknowledged there had been some "pretty unruly people" that had been a nuisance to neighbours.
"It's certainly true that three hostels in a quite small area of Parnell have been causing a lot of unrest and disturbance."
But that was only a relatively small number of residents, he said.
"There's also good people there who just want to go to work tomorrow, and we should be worried about their safety."
A scene guard will be in place overnight until a fire investigator can begin looking into the cause of the blaze.
FENZ is asking the public to avoid the area.