States and territories could be given financial penalties for failing to meet housing targets, under a proposal by business groups.
A new report by the Business Council of Australia has recommended national housing targets should be tied to population growth forecasts.
The report said the targets should then lead to actions state or territory governments could take to meet demand.
Under the proposal, jurisdictions that meet housing targets would get financial incentives, while those that don't would be penalised for failing to meet it.
"This will provide a direct link, with specific incentives and penalties, between the forecast growth of the nation, which is in part controlled by the federal government, and the net additional dwelling targets set by states and territories," the report said.
"This should take into consideration both greenfield and infill development."
The report also recommended that the process for land rezoning and approval for new housing projects should be sped up, as well as a stronger alignment between new housing projects and infrastructure.
Business Council chief executive Jennifer Westacott said key housing issues needed to be addressed.
"There is simply not enough new homes being built to meet demand at a time when housing affordability is declining," she said.
"In fact, new housing supply has been falling over the last half-decade. There needs to be a clear plan for building new homes and infrastructure that is aligned with the growth in Australia's population."
The report coincides with Treasurer Jim Chalmers indicating he was willing to work with states and territories to boost housing funding.
The federal government's signature $10 billion housing fund remains stuck in parliament, with the Greens and coalition not backing the proposal to build 30,000 new social and affordable homes over five years.
While guarantees of 1200 homes for each state and territory have been secured, the Greens want a rent freeze and more immediate investment to solve housing shortages.
The treasurer said the government wanted to boost housing supply but was also open to negotiating with state and territory governments on possible extensions of funding.
"Obviously (I'm) not going to pre-empt the conversations that we have with the states and territories or to nominate a number, we've indicated that we will be extending it, we'll work in the usual collaborative and cooperative way," he told the ABC's Insiders program on Sunday.
Greens housing spokesman Max Chandler-Mather said while it was a positive sign the treasurer would look to boost funding to state and territories, a rent freeze was still needed.
"Labor's housing bill doesn't guarantee a cent in funding for public and affordable housing, and does nothing for renters in the middle of the worst housing crisis we've seen in generations."