UPDATED 7.30PM The Government's outlining its National Policy Statement on Housing - a measure it sees as a long term tool to address rising house prices.

Building and Housing Minister Nick Smith said it sets a clear directive to urban councils that they must provide sufficient capacity for new housing and business that matches population growth.

He said they'll also have to respond to housing affordability data and building consent figures, and the value of land on their urban boundaries.

"And if they're not matching up in terms of their plans, they'll be required by law to change them."

Mr Smith said Councils tend to focus on local issues and when dealing with planning matters focus on communities.

"And there is not the strong voice for the young Kiwi family that is trying to get into a home - the NPS provides that voice."

He said it should make it easier for those wanting to get into the market, but it'll take time.

"For those first home buyers, quick, instant, acute solutions do not exist. Anybody here who pretends that housing affordability, declining home ownership is today's issue is ignoring the research that it's been declining for 25 years."

Councils are being told they have to provide sufficient land for new housing and businesses to match projected growth in their regions.

Len Brown said they've already been working with Government on that.

"I think they're bringing an assurance that they can actually encourage councils, but by and large we have been working on all those fronts anyhow."

However, Labour Party housing spokesman Phil Twyford said the policy was a "damp squib" which was unlikely to make any different to Auckland's housing crisis.

The NPS failed two crucial tests, he said. It did not give guidance on how infrastructure would be financed. And it said nothing about abolishing Auckland's urban limits - a move which had been signalled by National and was supported by Labour.

Instead, Mr Twyford said, it set up a "bureaucratic system" for assessing housing demand.

"Where's the promised game-changer?" he said.

"Well they've been talking this up big time. They promised a bazooka and all we got was a pop gun."

John Key told reporters there are plenty of houses available on online auction site TradeMe for less than $500,000.

Mr Twyford said it's a joke and he can't believe the Prime Minister's suggested it.

"There are some houses that are there for $500,000 but most of them are dungers. They're cold, they're damp, they're small, they're poky, they're on leasehold land, they're an hour and a half's drive from where the jobs are. It is simply not a serious suggestion."

The Green Party said today's housing announcement is good in theory, but won't build houses.

Green Party Co-Leader James Shaw said by itself it's not going to fix the problem so it's a bit of a mixed bag.

"It is silent about how you fund new infrastructure on the edges but by itself it is not going to fix the housing crisis.

"The Government actually has significant opportunities to build houses itself which it's refusing to take up because its ideologically opposed to the idea that the state should be involved in house building."

New Zealand First Leader Winston Peters is accusing the Government of trying to hide its own policy mistakes with its NPS.

He's calling it ineffective, and designed to shift blame to the Auckland Council for a problem of the Government's making.

"This is just a butt-covering exercise for their miserable policy failure and you all know it."

Economist Shamubeel Eaqub told Larry Williams the policy identifies what needs to happen, but doesn't give councils the tools to do it.

He said targeted infrastructure bonds would open up more funding for the areas that need it, but more transport infrastructure is needed if there are going to be more houses.

"The problem right now is we don't have the mechanisms and tools and I want central government to take a leadership position in this and tool local government to deal with this and stop blaming them.

"And the third thing is some kind of mechanism to deal with density within our existing footprint, and unless we do all of the three things we're not going to be able to solve what is a really difficult problem when it comes to housing."

Response to the NPS from National's support partners was generally supportive.

Act Party leader David Seymour said it was a good first step towards broader reform of planning rules.

"While others have attacked foreigners and proposed new taxes and red tape, Act has always said that housing affordability is fundamentally a land supply issue," he said.

United Future leader Peter Dunne said the Government was finally "cutting to the chase" of housing affordability issues.

But he said that broader reforms of the Resource Management Act should now be abandoned, because the NPS had made them redundant.

 "Affordable housing provision has been the Government's real priority since it began talking about changes to the Resource Management Act over three years ago," he said.

 "In the meantime, the Bill currently before the House goes way beyond the housing issue, traversing completely separate issues like water management and wider regional planning."