The Property Institute is arguing the government's new proposal to cool off the Auckland housing market won't work.

Finance Minister Bill English has floated the idea that the government could set a house price-to-income ratio for councils.

The ratio would kick in when property prices reached a certain level and force local councils to open up new land for urban development, instead of intensifying existing urban areas.

Chief Executive Ashley Church said the ratio assumes the opening of land would decrease demand in that area, and in doing so the value of property, making it easier for developers to get in.

He said in reality, the cost of that land would quickly rise with the rest of the city.

Church added it also assumes that if developers buy at a lower cost, they will sell at a lower cost than they might in other areas of the city, but that's unlikely because developers want to make money on their developments.

Church said it would also encourage developers to build even cheaper houses, bringing with it a raft of other issues.

He said the best way to provide more houses, and get developers in to do that, is to use both the intensification of existing urban areas, and the horizontal spread of urban development.