The Government is also considering the establishment of Urban Development Authorities (UDAs) for specific areas of high housing need.
The idea of UDAs was proposed by the Productivity Commission last year. It said authorities could assemble sites, master-plan large residential developments and partner with private sector groups to deliver them.
What special powers authorities would have is unclear.
Housing Minister Dr Nick Smith was asked by media if the Government would consider using the Public Works Act to take land off an owner who resisted development inside a UDA area.
"The Productivity Commission recommended that the urban development authority have that specific power. That is something for Cabinet to work through over coming months," Dr Smith said.
Overriding private title for development was a "big call", he said.
"Yes, we are the National Party, but we have responded in a very pragmatic way to the challenges in Christchurch. And that has involved overcoming some of those pure views about property rights."
Dr Smith told the Herald such a move would not be aimed at landbankers. "You can have an area of redevelopment where there may be 50 or 100 titles, and the bulk of the landowners want to be part of the redevelopment but you can have a small number holding out."
Matt Paterson, acting chief executive of the Property Council, said UDAs were a good way to reduce the risk that such fragmentation and planning rules posed to development.
"They have got to go as far as making the land economically feasible for development, and allow private developers to do their work. They should not compete with private development."
The infrastructure fund will be available only to Auckland, Hamilton, Tauranga, Christchurch and Queenstown councils. The Government will borrow up to $1 billion, and councils are expected to repay the zero-interest funds within 10 years.
Labour leader Andrew Little said the "$1 billion credit line" would do little to address the housing crisis.
"When you have an infrastructure deficit in Auckland alone of nearly $20 billion and billions more around the country, a $1 billion loan? It simply doesn't cut it."
Green Party co-leader James Shaw said the fund was a step in the right direction but not enough and a commitment to invest in houses was needed.
Auckland Mayor Len Brown welcomed both the infrastructure fund and establishment of UDAs and looked forward to reviewing the initiatives in detail.
Hamilton Mayor Julie Hardaker said her city had land that could accommodate three years of the necessary housing supply - but it couldn't control how quickly developers built. Labour MP and mayoral candidate Phil Goff said the fund was much less than needed, but a welcome starting point.
Q&A:
What has been announced?
A $1 billion fund to speed house construction in Auckland, Hamilton, Tauranga, Christchurch and Queenstown by funding roading, water and other infrastructure.
Who pays?
The Government will borrow up to $1 billion, and councils are expected to repay the zero-interest funds within 10 years.
What else is being considered?
New urban development authorities could be set up to drive housing development in specific areas, by assembling sites, and partnering with private sector groups to build homes. Private land within these areas could be seized under the Public Works Act under a measure to be considered by the Government.
