The council can also force developers to build within set timeframes to prevent "landbanking".
The Property Institute labelled the scheme "fantastic news" and said it would help to eat into an estimated shortfall of 30,000 Auckland homes.
But chief executive Ashley Church said "affordable homes" only meant lesser quality and the rest would be "priced at whatever the market is demanding" once they were built. Any new housing was
welcome, but the project would do little to address house price inflation in the medium term, Mr Church warned.
The scheme, launched in early 2012, has seen parcels of land ranging from individual properties to 20ha lots freed up.
Auckland Council Property chief executive David Rankin said 2500-3000 dwellings would eventually be built. But he conceded only a handful had been completed to date and the new homes would become available over five to seven years.
Last week, the Government announced a similar plan to free up about 500ha of surplus Crown-owned land around Auckland, then work with private developers to build up to 10,000 homes.
Building and Housing Minister Nick Smith said the plan would have a "cooling effect" on rocketing house prices. He is due to unveil the first batch of land parcels today.
Auckland Council Property has a portfolio valued at $1.3 billion, making it one of the country's biggest real estate entities.
Mr Rankin said surplus council land included the Ormiston development site in Flat Bush being built by Todd Properties. This will eventually feature a new town centre and about 600 homes. Other development sites were in New Lynn, Hobsonville, Avondale, Whangaparaoa, Henderson, Green Bay, Manukau, Mt Eden, Otahuhu and the central city.
Mr Rankin said some of the land parcels came with conceptual design guidelines for lower-cost terraced housing, "indicative of what we'd like to see".
Officials would then work with developers to deliver housing projects that met community housing needs but were also commercially viable.
A 3498sq m site in Avondale's Racecourse Parade is currently for sale with conceptual plans for 25 two- and three-bedroom terraced homes on Special Housing Area land formerly occupied by the Suburbs Rugby Club.
Mr Rankin said the council had joined the NZ Housing Foundation at other sites in Avondale and Papatoetoe to develop affordable housing, some under a shared-equity scheme aimed at first-home buyers.
The purpose of the property disposal scheme was two-fold: to sell surplus land for profit and free up land for housing. "It's a double benefit, it's a win-win," he said.
Money from land sales helped to fund the council's other capital expenditure projects and community facilities.
Mr Rankin acknowledged pressures around building infrastructure to service new land parcels, and a shortage of skilled tradesmen.
But he welcomed government moves to free up Crown land to help address Auckland's housing shortage.
"It's all more work but it has to happen."
