Two Special Housing Areas that would have seen 500 homes built in Pāpāmoa have been canned after the Government decided to ditch the policy.

The Government notified Tauranga City Council in February that it had decided to allow the Housing Accords and Special Housing Areas Act to expire as scheduled in September.

It had been considering extending the legislation, which was introduced in 2013 as a flagship policy of the previous Government to address housing supply and affordability.

Housing Minister Phil Twyford said Special Housing Areas (SHAs) were always an interim measure.

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While they had increased housing supply in some cases, they had not made housing more affordable and the costs outweighed the benefits.

The council and local developers, however, say SHAs were a success in Tauranga and their loss will hasten a looming land supply crisis in the city.

According to a report presented to a council committee today, the repeal spelled the end of at least two new SHAs being planned for Tauranga that were reliant on the legislation being extended.

The council had been working with developers to plan the two areas in Pāpāmoa - which together would have yielded more than 500 homes - but work had stopped because it could not be finished before September.

There were other conventional options for developers if they wanted to pursue putting housing on the land, but that would take longer without the fast-tracking SHAs enabled.

Further SHAs had also been part of the council's longer-term strategy for its two big growth areas - Te Tumu and Tauriko West.

Andrew Mead, city infrastructure and planning manager, said they could have knocked three to four years off the Resource Management Act process for Tauriko West.

The council voted unanimously yesterday to urgently ask the Government to reconsider its decision to end SHAs in Tauranga and the wider Western Bay of Plenty sub-region.

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Local developers also called for their return.

Peter Cooney of Classic Group said: "We need the SHAs back and we need them back now."

Twyford told the Bay of Plenty Times the Government would not be revisiting its decision to drop the SHA legislation. It would be phased out to give councils time to progress SHAs already in the pipeline.

"While it increased housing supply in some cases, it hasn't made housing more affordable.

"In fact, research found that in some cases houses were 5 per cent more expensive in Special Housing Areas than outside them."

A study found that was true in Auckland, in part, to developers building the most expensive homes first and leaving the affordable ones to the end, which resulted in price increases.

Analysis of sales figures in Tauranga by council staff, however, found a different situation.

On average, the houses being built in SHAs were smaller and cheaper than elsewhere in the city.

Between September 2017 and August houses in SHAs sold for an average of $645,000 compared with $701,000 elsewhere in the city.

As of August, 13 Special Housing Areas had been approved in Tauranga with capacity for 3500 houses. Some 580 homes had been built while another 900 had building consents.

The repeal was not expected to affect the most recent SHA approved by the council for 77 houses in Emerald Shores Dr, Pāpāmoa.

That proposal was awaiting approval from Housing Minister Phil Twyford.