The government has asked the Productivity Commission to review urban planning rules and processes.
Finance Minister Bill English said he wanted the commission to go back to first principles and devise a more flexible system.
Local councils currently administer planning under the Resource Management Act and other laws.
But Mr English said many parts of the system were outdated and unwieldy. International best practice had moved on and so must New Zealand, he said.
He told TVNZ programme Q+A that the government wanted urban planning rules that helped keep housing affordable, and helped the productivity of the wider economy.
"We've asked the Productivity Commission to do some blue skies thinking," he said.
"And that is to say to them, look, putting aside the current framework - RMA, Local Government ACt. Transport Act, all of which have a big impact on how our cities develop and how they're planned - how would you do it if you were going to review the whole thing?"
He has asked the commission to report back on the best system for land use allocation by November next year.
Local Government New Zealand vice-president Brendan Duffy said there would not be a council in the country that would not support a review.