Forty people turned up to a scheduled viewing of a flat in the Wellington suburb of Mt Cook this week.

A Wellington rental squeeze causing dozens of people to compete for the same flat is "a problem of success" and not a sign of a crisis, Prime Minister Bill English says.

Forty potential tenants queued up for a flat viewing in inner-city Mt Cook on Wednesday morning, with the property manager likening the scene to "a street party".

The queue followed an estimate this week that Wellington is currently 3590 dwellings short of what it needs, with the head of the city's housing taskforce saying multiple tenants were sharing rooms as a result.

How can we fix the housing crisis? Share your stories, photos and videos. Contribute

Were you in the queue? Email newstips@stuff.co.nz

Labour housing spokesman Phil Twyford said the photo was a sign the housing crisis had reached Wellington.

READ MORE:

* Wellington flat viewing attracts 40 people

* 3500-home shortfall in Wellington

CHARLOTTE CURD/FAIRFAX NZ Landlords have all the power in Wellington at the moment, Labour housing spokesman Phil Twyford says.

Twyford said there were increasing reports of "extreme situations" in the city's housing market, with large crowds viewing flats, excessive letting fees and landlords "inviting tenants to bid against each other".

"It's a landlord's market at the moment. It's a seller's market and tenants in Wellington are up against it."

A shortfall of about 3500 properties was responsible for some of the pressure, while rents were also rising to follow house prices after an increase in property speculation.

CHRIS SKELTON/FAIRFAX NZ Prime Minister Bill English says the Wellington City Council is working hard to deal with a shortfall of housing in the city.

"Investors want to see a return on their investment, so that tends to push rents up as well," Twyford said.

However, English said the demand for rentals was "a problem of success", which the Wellington City Council was already trying to address.

"It's actually a long time since Wellington has felt the pressures of growth – the Government's investing large amounts of money in the infrastructure…

"The council has shown that it understands for the first time in a number of decades, there is pressure on the housing stock and they are enabling more houses to be built because that's the only way that they're going to see a bit less pressurised."

Damage to Wellington office buildings from last November's Kaikoura earthquake had also had "a bit of a flow-on effect" to the city's accommodation, English said.

Although the large lines were "certainly concerning for people who are looking for accommodation", they did not show a crisis as the housing shortfall was well understood by the council.

Wellington hasn't experienced pressure in its market for quite some time and as long as they respond quickly, they'll be able to deal with it."