Prime Minister John Key has been accused of "dictatorial" behaviour over his threats to overrule the Auckland Council if it does not agree to free up more land for housing.

New Zealand First leader Winston Peters said Mr Key was "bullying" the council by discussing the prospect of commissioners for the city.

"That's dictatorial. It's arrogant," Mr Peters said in a speech at the University of Auckland today.

Last week, Mr Key said last week that land supply issues had been largely been solved in Christchurch using the power of Canterbury Earthquake Recovery Authority and commissioners.


Those same supply issues were now present in Auckland, he said, hinting at Christchurch-like special powers to fix the housing shortage.

Mr Key clarified today that the Government was not considering commissioners in Auckland. However, he said, the Auckland Council would lose the final say on whether land was freed-up for housing.

The Government will soon release a National Policy Statement which will force growing councils to release more land for residential development if specific thresholds for growth or affordability are reached. The Prime Minister confirmed that the statement would include income-to-price ratios, which would trigger local authorities to release land if a region's median house price far outstripped median income.

The plans to get rid of urban development restrictions have raised concerns about how the heavily-indebted Auckland Council will pay for the roads, water pipes, and schools which are needed for new housing developments.

Mr Key said the council might have to sell assets to cover infrastructure costs. But he would not be drawn on what the council could sell.

"It's not for the Government to decide the makeup of Auckland Council's balance sheet. But it is appropriate that the Auckland Council looks at the balance sheet and how if might fund the growth and needs of Auckland city."

Councils are able to collect levies from developers for infrastructure, but those levies are partly blamed for the high cost of housing.

The Auckland Council wants congestion charges to pay for new infrastructure. The Government has rejected the initiative.

In his speech this afternoon, Mr Peters blamed "peak immigration" for the Auckland's housing problems.

"Too many people. Not enough homes," he said, noting that half of the annual arrivals of 70,000 were settling in Auckland.

The Government has previously said that high net migration was just one part of an rare "trifecta" which is putting pressure on housing - along with record low interest rates and high confidence in the economy.

It has ruled out restrictions on demand, saying stamp duties and bans on foreign buyers in other countries have not made houses more affordable.