In launching the $520million grants scheme yesterday, Prime Minister Kevin Rudd described housing affordability as out of control, and said he hoped the scheme would provide some relief to low-income earners.

Grants of up to $10,000 a property will be provided to fund state, territory and local government initiatives that provide high-demand affordable housing. Applications will need to demonstrate that the initiatives will pass those savings on to home buyers.

The Prime Minister said the cost of housing had accelerated ahead of average incomes, signalling the need for a new approach.

He said feedback from the housing industry had demonstrated the need to reduce the costs of developments.

''The overwhelming presentation to us by industry 12 months or so ago at our summit on housing affordability was, you need to match demand-side measures with supply-side measures,'' Mr Rudd said.

''It [affordability] has got out of control and we need to start bringing it back under control.''

The Prime Minister acknowledged the program would not be a cure-all but it would make an impact.

''It does not solve all the problems in housing affordability, but it is a program which has been warmly welcomed by the industry.''

Master Builders Association chief executive Wilhelm Harnisch said the grants were an important first step in tackling housing affordability.

Mr Harnisch said, ''Dealing with delays in state and local government planning processes, and increasing demand for community infrastructure, are the essential keys to solving Australia's systemic underlying housing affordability challenges.''

A spokeswoman for Chief Minister Jon Stanhope said under caretaker arrangements any application for a grant would also need to be approved by the Opposition.

She said the Government would apply for funding under the scheme but could not specify any projects that had been identified for the scheme. Applications for the funding close on October 9.

The ACT Government will also receive $500,000 from the Federal Government to help continue shifting planning applications to an electronic system.

The change, based on national guidelines, aims to improve what the Prime Minister called an 18th-century system.

The electronic system, originally advocated by the Howard government, was aimed at reducing applications' complexity and administration times.