Wellington City Council wants more medium and high density housing to meet demand in the capital.
The council has released plans for a 30-point housing strategy to tackle housing affordability, availability and quality in Wellington.
Wellington city councillor and housing portfolio leader, Brian Dawson, said the council would look at medium and high density housing in already developed areas of the city.
"There are still some areas around the city itself that we can do some more work in, for example Adelaide Road running down from Newtown down to the Basin Reserve.
"That area is largely undeveloped and has for a long time been identified as a good target area to do more housing development."
Kent and Cambridge Terraces were also options for further development.
Mr Dawson said the housing market had been left to meet demand but had failed.
"That's why we have a rental crisis in Wellington, that's why our housing to purchase market is extraordinarily challenged. Not quite to the same level of Auckland but not far off it."
The council has pledged 750 new homes over the next 10 years that are affordable and for social housing but said 30,000 new homes are needed by 2043.
Mr Dawson said the council was also looking at developing available sites around the northern suburn of Grenada North, but said those were few and far between.
"What we do know is that when we do those developments we need to make sure they're done smarter than they have been in the past.
"So we've really got to get away from this idea that everybody needs a quarter acre section and a huge house. We've got to maximise the amount of land that we've got."
The council also plans to work with developers and inner-city building owners to convert offices into apartments, with a trial project currently underway.
Wellington mayor Justin Lester said the city's geography, with the harbour on one side and the town belt on the other, naturally limited sprawl.
"But as a city that is growing fast, there's an urgent need to address a variety of issues at the same time.
"Homelessness is an urgent issue and, at the same time, so is student accommodation, the quality of rentals and whether or not people can afford to buy their own home."
The housing strategy is part of a wider effort to look at urban planning in Wellington.
The council intends to work on its district plan, which Mr Dawson said was like a "patchwork quilt" and needed to be reviewed to ensure it enabled housing and greater urban development.