Housing affordability is still a problem and the "housing market is not working properly", says Finance Minister Bill English.
Mr English told Parliament today "housing affordability remains a deep-seated, complex and serious problem," and the Government would respond to a Productivity Commission call to tackle the problem.
The Government response to the Productivity Commission report will be approved by Cabinet before the end of the month.
He said said a multi-pronged work programme will be issued in response to the report.
The Productivity Commission called for more land to be opened up for housing in urban areas.
Auckland Mayor Len Brown has said the Council has the land available to build 18,000 houses in Auckland.
He was seeking a partnership with Government to provide capital to building the houses.
Mr English said the Government were working with the Tamaki redevelopment but were not likely to be able to stump up capital to fund housing.
The report proposed improvements to building consent processes to speed up service and reduce costs; improvements in the way local council development charges for infrastructure are calculated and applied, and improvements in the construction sector.
The 2012 Annual Demographia International Housing Affordability Survey showed the median cost of a house in New Zealand is 5.2 times the median income in New Zealand, and in Auckland 6.4 times median income
"Any ratio above five is considered unaffordable.
"Despite demand for low cost houses, relatively few are being built - in part because of the very high cost of land, particularly in Auckland," said Mr English.
Income related rents were forecast to rise 30 per cent over the next four years, costing the Government around $200 million per year, he said.
"As rents rise, this pushes up the cost to Government of income related rents and accommodation supplements.
Mr English said Massey University's home affordability report showed an improvement in affordability in the last 12 months in all regions except Auckland.
When asked what the Government were doing about housing affordability he said wages over four years, he said pressure has been taken off interest rates meaning repayments levels were lower.
