"The reception area is always full of people waiting either to talk to someone about rental properties or filling out application forms."
There was also a shortage of houses for sale in Rotorua, Mr Forsyth said.
Just five consents for new homes were issued in the Rotorua district in January.
The number of home building consents issued nationally increased little in February, said a spokesman for Statistics New Zealand.
"The actual number of homes consented was up only slightly from last year," Neil Kelly of Statistics New Zealand said.
There was a small rise in the number of housing consents issued in most parts of the country - more than 10,000 new homes were given consent in Auckland.
Several families have spoken to the Daily Post in recent months about their struggles to find housing.
Ashley Wharehinga said last month she had applied for more than 30 rental properties for herself, her daughter and her parents with no luck.
She was eventually offered a home after two months of sleeping on a mattress on the floor of her niece's bedroom with her 2-year-old.
Eves Rotorua sales manager Don Gunn said in February there were 10-15 people applying for each property.
Richard Evans, owner of Rotorua Rentals, said he had nine enquires for one house almost immediately after it was advertised.
Rental prices were rising with the drop in supply - rents throughout the Bay of Plenty rose 5 per cent in February, according to the TradeMe Rent Price Index.
Mr Evans said many beneficiaries in particular were struggling to pay high rents.
"Rents for beneficiaries are getting so high their accommodation supplements won't cover the costs of their rentals."
Most cities in New Zealand issued far more consents than Rotorua in February, even those with fewer people.
In Whanganui, a city of just 44,000 people, 12 home building consents were issued.
Napier and Hastings councils issued 25 consents each, and Whangarei District Council issued 74.
Mr Forsyth said there was land available within the confines of the city itself as well as in the wider Rotorua district.
There was strong demand for new houses, he said, but few were available due to a lack of new subdivisions.
"We are stagnating at the moment...some really serious questions need to be asked."