The Productivity Commission is calling for lower-cost housing to relieve pressure on the property market in Auckland.
The commission released a report on housing affordability in April and its chairman Murray Sherwin told TVNZ's Q+A programme on Sunday that the houses being built in New Zealand were too expensive.
Only five companies in New Zealand build more than 100 houses a year, while 4600 companies build one house a year.
There were no economies of scale from large developments that could deliver lower-cost housing.
The commission, which was set up in 2011 to conduct research on productivity, has already called for an immediate release of new land for residential development in high-demand areas such as Auckland and Christchurch.
Mr Sherwin said he was hopeful of a "substantive response" from the government to the commission's report on housing affordability because the status quo could not continue.
"I think what we need in New Zealand now is a supply response. We need houses to be constructed to meet demand."
Councils needed to sit down with developers to come up with projects that provided lower-cost housing, he said.
Auckland had a shortage of 10,000 to 15,000 houses and new building was not at a fast enough rate for population growth.
"The cost of houses is too high. We can build them cheaper. We should be building them cheaper," Mr Sherwin said.
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