Building and Housing Minister Nick Smith has thrown down a gauntlet to local body politicians this morning.

He's revealed more about a directive he'll be issuing next month, under which councils will be ordered to free up more land for housing.

Dr Smith told TVNZ's Q&A programme he wants to see long-term plans, which will encourage people to build.

And he expects action to rein in the practice of land banking, for profit.

"On the fringes of Auckland, there is large amounts of land that is imminently suited for housing, and if we're going to solve the problem in Auckland it can't be this binary choice."

"Is it up or out? It's actually both" he added.

Dr Smith is also warning speculators the days of easy tax-free returns from the Auckland property market are over.

Dr Smith said the so-called bright line test requiring buyers to provide an IRD number, is being used to identify those who buy and sell for a profit.

He said Inland Revenue can now follow property deals, and make sure speculators pay their share.

"And so they're going to be very easily able to track every property that is bought for investment purposes, people who are pretending that they can make those investments in housing markets like Auckland without paying tax are going to get a very nasty surprise."