The government has promised Labour will soon be proved wrong, after a spat over the plans to build more houses in Auckland.

As housing supply levels in Auckland fail to keep up with demand, the government announced on Budget Day that 500 hectares of Crown land would be freed up to create more housing in the region by private interests.

As part of the announcement, $52 million was set up in a fund to help build houses on that spare land. There has been no discussion as to the affordability of the housing on the new land.

Labour's housing spokesperson Phil Twyford said he had several well-placed sources who told him only a quarter of the planned 500 hectares will actually be usable.

He claimed the rest of the building areas were totally unsuitable to be built on.

"Including a cemetery, including school playing fields, including this electric sub-station and another one that we believe are in the list that his officials were using," stated Twyford.

Twyford believed the government needed to release its list of possible building sites to clear up confusion.

However, housing minister Nick Smith emphasised Twyford's remarks were all wrong.

"We'll be announcing the first batch of those sites on Friday, but none of the lists that I have seen include any of the properties that Mr Twyford has dreamed up," added Smith.

"None of the properties that he's listed, these ones where he's claimed there's a cemetery or a school playing field, or substations or the like, are on the list of properties that the government is considering."

Twyford also mentioned a substation close to the vacant land had exploded only a year ago, illustrating the dangers of the government's plan.

However, finance minister Bill English, wasn't worried about Labour's claims.

"Well, I presume it's not always exploding," joked English.

"Presumably Vector have some responsibility to make sure their substations don't explode."