Mr Key made the comment during a business breakfast organised by the Queenstown Chamber of Commerce in the resort yesterday.
Addressing an audience of 330 people, including many tourism operators and business leaders, in the Skyline complex, he said accommodation problems were not new.
"The housing market, roading, infrastructure — there is no question there’s pressure on those things in Queenstown. I think the simple answer is we have to do more and spend more."
He said the fund, announced last month, would take pressure off the Queenstown Lakes District Council (QLDC)
in the short term — with central government temporarily picking up the tab.
Urban development authorities (UDAs) were pitched by the Prime Minister as a solution to the housing crisis nationally. He said these authorities could create fully functional residential areas, with responsibility for all horizontal underground infrastructure and planning processes, and ensure they fitted with what already existed.
"In Australia, we have seen much larger developments at much better prices, driven from UDAs.
"If we are going to have New Zealand as a highly growing, very effective and successful country, we are going to have to build urban structures. It is not much more complicated that."
He said while an influx of hospitality and other workers to Queenstown created a housing shortage, Queenstown could not function without them.
"Ultimately, if we want to continue to grow, we have to have the infrastructure to support that. With all the challenges of growth — the alternative is everyone leaving.
"Yes, we have some challenges but they are positive challenges of growth."
Speaking to the Otago Daily Times after the breakfast, he said the only way of "practically resolving" housing shortages was to build a more affordable product.
"Everybody accepts there is an issue in Queenstown. The role the Government can play is making sure land is released and those developments take place."
The Government was working with the council to do that, including the use of the $1 billion fund, said Mr Key. Mayor Vanessa van Uden said the council was putting forward proposals.
"If they want to share it between us and Auckland, that would be great."
