Smith said the "root cause" of housing affordability was insufficient land supply, which had driven up section prices by 350 per cent in Auckland since 1990.
"The National Policy Statement ... requires councils to allow for a greater supply of houses, so prices rise more slowly and houses are more affordable," he said.
Councils will have to closely monitor indicators such as housing affordability, prices, rents, and consents relative to population growth on a quarterly basis to ensure their zoning decisions are appropriate.
The NPS would also be a "powerful level" for developers or others who want to appeal council decisions to the Environment Court on the grounds that local authorities were not meeting supply requirements.
It comes into force on December 1, and will have the biggest impact on high growth areas such as Auckland, Christchurch, Tauranga and Hamilton.
Smaller, fast-growing cities including Nelson and Queenstown will also be affected.
Since the NPS was put out for consultation in June, the Auckland Council has approved its 30-year plan, which allows for greater density in the city. Smith said the NPS would compliment Auckland's Unitary Plan by addressing issues of land supply.
It comes as new Statistics New Zealand figures show building consents in Auckland have risen to 9960 a year. It is estimated that 13,000 homes are needed to keep pace with population growth.
