The Council for Infrastructure Development wants to make the government's newly-proposed development fund go further by changing the way infrastructure is paid for.
And it thinks this could shave thousands and potentially tens of thousands of dollars off the cost of each new home.
Under the fund, councils in high-growth areas will have 10 years to repay interest-free loans for infrastructure for new housing developments.
But the Council for Infrastructure Development said the costs were unnecessarily high because councils insisted developers paid upfront for water, sewage and other services that typically last for many generations.
It said these should be funded with borrowed money, payable by all those who benefit from them.
While local government rates would have to be higher to pay the interest bill, this would be more than offset by lower initial costs, which were currently unfairly imposed on the first buyer. the council said.