Auckland Mayor Len Brown says the council will seriously consider Labour's KiwiBuild affordable housing policy, launched at the party's conference last week.
But Prime Minister John Key said he thought Labour was in "fantasy land" over its proposal.
Labour leader David Shearer met Mr Brown in Auckland yesterday to talk about land availability as part of the plan to make houses more affordable.
Mr Shearer visited the New Zealand Housing Foundation, a charitable organisation building affordable housing at $300,000 or less and in a similar way to Labour's proposed KiwiBuild policy.
He visited 80 houses that have already been built in Glen Eden and Mount Roskill, as well as more houses under construction in Mangere.
Mr Brown discussed the city's housing woes with Mr Shearer and Labour MPs Phil Goff and Annette King.
"The Labour Party has made a very useful and helpful contribution to the debate about housing affordability in Auckland and across the country," Mr Brown said.
"We need to explore all options and work with all sectors of the community to find solutions."
Labour's plan is to build 100,000 basic homes over 10 years, which Mr Shearer said would create jobs as well as give first-home buyers in areas of high house prices, such as Auckland, a foot in the door.
Mr Shearer said it would be the largest building programme in 50 years and create up to 2000 apprenticeships.
The homes would cost $300,000 or less, according to Labour. Two-thirds of the homes built in the first five years would be in Auckland. Others would be in "unaffordable" centres such as Christchurch, Tauranga, Nelson, Wellington and Queenstown.
There would be a one-off initial investment of $1.5 billion, to be recouped as homes are sold.
Mr Key was critical of Labour's plans.
"You probably can build something for $300,000 but not at the level of expectation that those first-home buyers that will be hearing that policy think you can build."
He said the houses would be very small, and miles out of Auckland.
"The only place you can buy a section for about $50,000 is in places like Lumsden. I suspect if all the 100,000 homes were built there the price would go up."
Mr Key said the policy could cost more than $1.5 billion and would not meet the expectations of the first-home buyers.
"If Labour's track record is anything to go by - it will be a combination of both."
Mr Shearer said on TVNZ's Breakfast programme yesterday that Aucklanders would have to move away from the idea of a house on a quarter-acre section.
"It [will] have to be some terraced houses, some smaller sections - we're talking about affordable homes that people can get their first chance at owning," he said.
Labour's affordable housing plan:
* 100,000 basic homes built over 10 years.
* $300,000 maximum cost of each home.
* $1.5b one-off investment, recouped as homes are sold.
* 2000 apprenticeships created.