Deputy mayor Stephen Lawrence has requested an investigation into the state of the housing market in Dubbo.

As well as identifying shortages of certain housing types, Cr Lawrence has also called for an investigation into steps council could take to address the shortage, including "specific advice on other ways that council can work with other levels of government and the private sector to address any housing supply shortages identified, including whether there is a possible role for council in property development".

A forum with relevant stakeholders will also be held to explore the factors contributing to the undersupply of residential housing, and the actions that can be taken to address the concerns.

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Cr Lawrence said the housing shortage was "worse than it's ever been".

"It's hurting people in the community and I think it's on us to address it," he said.

If council were to expand from just developing land into property, Cr Lawrence said they would have to develop "the most robust procedures" to counter the conflict between being a developer and the regulator.

Councillor Greg Mohr also raised concerns.

He said going further into development could get council "into more trouble" in the long run with "other property developers who actually do this for a living".

The NSW government has just released its strategy for better housing across the state.

One of the actions in the strategy is for the government to strengthen relationships with councils, the community housing sector and developers to trial new innovative housing solutions.

Member for Dubbo Dugald Saunders said the Housing 2041 strategy and an initial two-year action plan will deliver improved outcomes immediately, and into the future, by focusing on housing supply, diversity, affordability and resilience.

"It's no secret that housing, both government and private, is in short supply in all parts of our region, but this strategy will allow us to better plan and deliver housing that meets the needs of people now and over the next 20 years," Mr Saunders said.

"We have listened to stakeholders who have told us about the importance of housing that is affordable, that is sustainable and meets the needs of households as they age.

"New and innovative housing will be delivered when and where it is needed, supported by sustainable technologies that can help reduce living costs."

Housing 2041 was developed in consultation with community feedback, following the launch of a discussion paper last June.

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