Manufacturing house parts is one way a new company is set to tackle Rotorua's housing shortage.

The newly-established business, Performance NZ, will create the wall panels of houses in a factory before sending them to building sites.

Business partner John Kelly said the process was faster than building on-site and created more energy efficient homes.

"It's quite a different building system and process for New Zealand to some extent, and different for Rotorua and its environment," Kelly said.

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Registered Master Builders Rotorua president Bill Clement said any new innovation was worth considering.

"I think that as far as prefab is concerned it's a good idea as long as it's cost effective," Clement said.

He said the extent of the housing shortage in Rotorua was hard to judge and there were a lot of new subdivisions coming up.

Kelly partnered with former colleague Andrew Smith for the venture.

The pair were both staff members at Toi Ohomai Institute of Technology in the carpentry course and the business stemmed from their time there.

They were involved in the Charity House initiative which saw students build a house which was then auctioned for charity.

Kelly said the pair was taking building principles from that project into their new business.

"The Charity House has been looking at improving insulation and performance as far as energy efficiency and looking at health aspects," Kelly said.

"Andrew and I have been working to implement these improvements in charity houses so we can see the benefit of them."

He said they decided to launch the venture off the back of "significant changes" at the polytech.

"We thought now or never, so now it is."

He said the costs were comparative to other building methods.

Kelly said the pair hoped to complete the business' first house in mid-winter and said he hoped it would grow quickly after that.

"It would be of benefit to generate more houses in our region."

He said they'd also be interested in supporting graduates of the carpentry programme at their former workplace and some graduates had already expressed interest.

He didn't think they would struggle to fill positions despite a skills shortage.

"Our intention is to use skilled craftsmen not just factory workers," Kelly said.

"I think the attractiveness is they'd be inside. The comfort of working indoors in a controlled environment."

Rotorua mayor Steve Chadwick has previously placed housing on the city's priority list.

In August 2017, Chadwick signed a Housing Accord aimed at boosting Rotorua's housing supply.

A target of 900 dwellings and 1050 sections over four years was set.

Seven building-related occupations were added to the skills shortage list in December including carpenters and joiners.

Kelly said one challenge they'd face was educating people about the method.

"The benefits we're promoting is this going to be healthier, energy efficient and weather- tight buildings.