Urban Taskforce chief executive officer Chris Johnson said National Housing Supply Council annual figures showed Australia was "slipping backwards" in terms of the supply of new housing and NSW was at the bottom of the list with a shortfall of 73,700 dwellings.

The report also showed rent exceeded wages growth.

"The impact of shortfalls of this magnitude is to force prices up, making housing less affordable and to drive rents up as new housing is just not available," Mr Johnson said.

He said it was not just a matter of zoning land for housing.

"Our members are telling us that the planning system in NSW is very complex and slow.

"Strong leadership is needed in metropolitan Sydney, in particular to ensure projects can be realised."

The state government released an issues paper on planning system reform this month.

Submissions on the paper are open until February 17.

Federal Housing Minister Robert McClelland said the National Housing Supply Council's report showed growth in underlying demand for housing was outstripping supply.

He said the federal government was making an unprecedented investment to increase the supply of affordable housing across the nation.

"Initiatives include the national rental affordability scheme, which is providing financial incentives for investors to build 50,000 new affordable dwellings for rental to low to moderate income households," Mr McClelland said.

He said the government invested $450 million in the housing affordability fund and provided more than $1.2 billion a year to the states as part of the national affordable housing agreement.

"The government is working with the states to finalise this examination of supply constraints in the housing market, with a report to be delivered to the Council of Australian Governments soon," he said.