But the coalition says the last time Labor tried this idea it helped dodgy investors build tiny apartments rather than good-sized family homes.

Bill Shorten announced a plan to pay investors $8500 a year for 15 years to build new homes, as long as they are offered to low and middle income renters for 20 per cent below the market rate.

"Our plan will mean that a family paying the national rental average would save up to $92 a week, every week of the year," Mr Shorten told Labor's national conference in Adelaide on Sunday.

"(We'll) make sure these homes are built where they're needed most, and to go to the people who need them most. Not foreign investors, nor international students," Mr Shorten said.

Community Housing Industry Association chief executive PETA Winzar welcomed a long-term plan to address affordable housing shortages, while the Australian Council of Social Services said the 25,000 homes a year was a good start.

But Social Services Minister Paul Fletcher said a similar program under Kevin Rudd had been full of holes.

"The incentive is the same for a one bedroom unit or a four bedroom house - so the scheme has discouraged the construction of bigger houses for families in need," Mr Fletcher said.

"The incentive is the same all across Australia - so it is less likely to stimulate new housing in higher cost areas.

"Bill Shorten wants to revive the scheme - but how it will be funded is all smoke and mirrors."

Shadow treasurer Chris Bowen rejected the government's analysis and said the Rudd scheme had worked well.

But he said Labor had learned how to improve it and the party was taking action to make it easier for people to find housing.

Australian Associated Press