But figures from Housing New Zealand, which approves applications for the subsidy, show very few Aucklanders are using the grant.
Just 9 per cent of houses bought using the subsidy were in Auckland and 9.5 per cent of grants were in the country's largest city.
That compares to a population base of around 32 per cent of the country based on the 2013 census.
Bruce Patten, an Auckland mortgage broker with Loan Market said he could only remember using the subsidy in one loan out of about 500 he had helped with in the last year.
"That is simply the house price. It's got be under $550k to start with."
Barfoot and Thompson data released this week showed the average price of an Auckland house hit $873,599 last month while QV data pointed to an even higher average of $942,760.
A Home Truths series run by the Herald found an "affordable house" in Auckland now costs around $673,400.
Patten said the housing cap needed to increase to around $650k and be reviewed annually to keep up with Auckland's house price growth and the income cap of $120k for a couple would also need to be lifted to enable people to service that kind of debt.
It's about setting it at a level where people are able to utilise the scheme and not adding fuel to house prices. It is a delicate balance.
But Nick Smith, the government's minister for housing and building, said Auckland had received more grants than any other area albeit at a lower percentage compared to its population.
He said the government was deliberately setting the cap at a level that was challenging to try and get the house building sector focused on building more affordable homes.
The government was also conscious of not adding to the pressure on Auckland's house prices.
Smith said he was continuously reviewing the numbers and would not rule out an adjustment in the future.
Nationally just 8.5 per cent of the properties bought using the subsidy were new builds although in Auckland it was higher at 19 per cent.
Read more
Housing turnover highest in Auckland
Buying frenzy puts homes out of reach
Smith said it had always been the case and always would be the case that the majority of first home purchases were going to be second hand houses or older properties.
"That's nothing unusual and quite realistic."
But he said there were developments like Weymouth in Auckland where 80 per cent of the houses had been purchased using the homestart subsidy.
The new stage of development at Auckland's Hobsonville Point would also see around 60 per cent of the houses built under the $550k price cap.
Smith said it would take time for developers to respond and the scheme had only been in place for a year.
"We are certainly getting increases in supply of new houses. But it is from a very low base."
Smith said he would become concerned about the subsidy if grant numbers in Auckland began to fall but so far they were increasing.
Who's using Homestart?
• 9 per cent of properties using the subsidy were bought in Auckland
• 9.5 per cent of the grants were given to Aucklanders
• 8.5 per cent of the properties bought were new builds nationally
• 19 per cent of the properties were new builds in Auckland
See more info from Housing New Zealand here:
