Auckland Council is in talks with the Government about the possibility of bringing forward infrastructure investment to support the construction of new houses.
Among questions put to council by Treasury is what projects would have the biggest impact on housing supply if the council could borrow a further $3 billion to $5 billion.
At a state of the nation speech in Auckland next Wednesday, Prime Minister John Key will talk about housing and is tipped to bring forward spending on several big infrastructure projects in the city.
He is expected to announce the Government will start funding main works for the $2.5 billion City Rail Link in 2018, two years ahead of an earlier commitment.
Mr Key may also announce progress on an east-west connection between Onehunga and Mt Wellington, the $380 million Penlink highway linking Whangaparoa to State Highway 1 and a new harbour crossing.
Auckland's spiralling house prices, affordability issues and a supply shortage have become a major political issue for the Government.
While Auckland house prices are expected to rise at more modest levels in 2016, the city, growing at about 40,000 people a year, is still experiencing a housing shortage.
Auckland residential building consents had a big month at 966 in November, about the same from a year earlier, according to Statistics New Zealand.
But Westpac industry economist David Norman said the figures showed supply well below the 11,000 dwellings the bank estimated were required each year for Auckland to meet a long-term supply shortage.
A Herald investigation last November found that two years after the council and the Government signed a "housing accord", only 102 houses were known to have been built under its "fast-track"rules at 97 special housing areas(SHAs).
Last month, staff from council, Auckland Transport, Watercare Services and Development Auckland held an urgent meeting to respond to questions from Treasury.
As well as asking about more "headroom" for debt, Treasury wanted answers to what projects the council could bring forward in its 10-year budget, expected numbers and timing of new houses, planning constraints and capacity issues.
Yesterday, Finance Minister Bill English said housing was a big issue for Auckland and the Government was trying to understand the self-imposed constraints council worked with to provide infrastructure to increase supply.
He said the Government, as the largest housing developer in Auckland through surplus Housing New Zealand and other crown land, hoped to get a clearer idea of the practical impact of the financial constraints faced by council.
Mr English said the question of more debt for council was hypothetical and a way of working out if there are constraints and what are the projects that do not get done.
"The council make its decisions about their finances ... .we are not trying to tell them they should borrow more money," he said.
Mayor Len Brown and council officers declined to comment, except to say council was working closely with the Government to look at how it could do more to address a range of challenges facing Auckland, including infrastructure and housing.
A report by Cameron Partners on alternative financing sources for council last November said the council's additional debt capacity over forecast levels was about $1 billion.
Aucklanders have little appetite for council debt, which has risen from $3.9 billion at the start of the Super City, hit $7.3 billion last year and forecast to reach $10.8 billion in 2025.