Wellington City Council is intervening in the capital's broken rental market to stabilise soaring rent prices.

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It's partnering with a developer to provide inner city apartments for potentially 500 essential workers like teachers and medical staff.

Analysis by Trade Me shows the housing shortage has pushed prices up 10 per cent in the past year.

Wellington is now the most expensive city to rent in, with the weekly median rent $585, according to Trade Me.

Teacher Jess Macauley is looking for a rental for her family and pet dog, something she says is very difficult and incredibly expensive.

"If you go to a viewing, you can expect 50 people at the door waiting with you," she told 1 NEWS.

But the partnership between developer The Wellington Company and the city council could provide a solution.

The Wellington Company is converting an old office block in Te Aro into apartments and will lease the building to the council for 15 years, with rent rises pegged to inflation.

The council will then sublet the building to tenants on incomes of about $50,000 - $90,000.

The model is understood to be the first of its kind in New Zealand.

"It is a model of rent stabilisation if you like," councillor Fleur Fitzsimons, who's in charge of the housing portfolio, told 1 NEWS.

"It's about creating stable and secure tenancies so that people who work in essential services, like teaching and nursing, can work and live in our city."

The Wellington Company plans to convert three more buildings in Te Aro and lease them to the council under similar conditions. All up, the four converted apartment blocks will provide housing for 500 people in the inner city.

The council says there's no direct cost to ratepayers, but the developer will spend about $50 million on the project, forfeit millions in potential market rent and turn a small profit. So what's in it for them?

Developer Alex Cassels says the deal does give the company a "really good lease", but says it's really about the concept of social enterprise.

"The developer or private company make a fair margin or fair deal as opposed to something more than that," Mr Cassels told 1 NEWS.