The methodology used by MBIE estimated the accumulated housing shortfall in Auckland after assessing the rise in population compared to new houses that have been built.
MBIE said the shortage of supply relative to demand had contributed to a large growth in prices, as well as an increase in rents.
The new Labour-led government plans to build 100,000 new homes in the next 10 years with its $2b KiwiBuild scheme.
In the coming three years, KiwiBuild aims to gradually ramp up to 10,000 high-quality affordable new residences for first-home buyers per year, half in Auckland.
Earlier Phil Twyford told the Herald it would take about three years for the programme to kick into full-strength, starting out at a few hundred or possibly 1000 residences in the first year.
Auckland's Hobsonville Point is the model the Government will use to duplicate that precinct throughout Auckland, Hamilton, Tauranga, Queenstown and potentially other areas where first-home buyers struggled.
While the market has cooled, with Auckland values falling in the last year for the first time since 2011, the average Auckland home is still worth over $1 million.
National Party housing spokesman Michael Woodhouse said he had not seen the housing shortage briefing figures, "but this is more hot air from Twyford.
"If things were so bad, prices in Auckland and Christchurch wouldn't be flat to falling.
We are in the middle of the biggest building boom in generations and consents are reaching 13-year highs.
"Mr Twyford appears to be creating an alibi for when his Kiwibuild programme fails to deliver his promised 100,000 homes on top of the massive build programme the National government already had underway."
