A proposed $5000 rates remission for those building their first home in Wellington has received a mixed response from builders, who fear it will do little to boost the supply of new homes in the city.

Wellington City Council wants to increase the stock of new housing, particularly of apartments, and mayor Justin Lester has called for the city to "grow up, not just out".

The rates remission initiative, which would have no impact on rates, is aimed at New Zealand citizens or residents planning a new build as their first home.

Lester said the deal, expected to be formally adopted by the council at a meeting on Wednesday, was a way to incentivise the construction of apartments.

"We want to see more people able to afford to live in the central city. We know Wellington needs to grow up, not just out."

The council has budgeted $200,000 for the rebate, and it would not place more costs on ratepayers, he said.

The historic rate of new builds in Wellington was about 700-800 a year. The council expects 80 to 100 new builds would be eligible to claim the remission.

Lester said the $5000 off rates would make a "real difference" for first-home builders. "We want to make it easier for people, especially young people, to afford to own their own home in Wellington."

However, Scotty's Construction owner Scott Feasey said he did not expect the rebate to make much difference, because first-home buyers could not afford to build close to the central city.

"You're not going to get many new people wanting to build."

First-home builders were looking at a minimum of $200,000 for a plot and $400,000 minimum for a build, he said.

"So often, people buy the land, and we cost it for them, and it goes nowhere because it doesn't fly, because they don't have the capacity.

"We get quite a few new inquiries, but we have to say we can't build to the budget that they're talking about."

Those who did pursue a first build had more money than the average, he said. "Their parents are usually partially funding it."

Jennian Homes Wellington managing director Simon Barber was supportive of the rates remission, but also doubted whether it would boost the stock of inner-city homes.

"It certainly wouldn't do any harm, would it? If council can get a rates rebate, that's a message that the council is supporting first-home builders."

He said first-home builders generally wanted to build close to the city, whereas Johnsonville, Tawa and the city's fringe suburbs were more viable.

Additionally, first-homers typically wanted standalone houses, which would cost more.

A terraced unit in Tawa might be a more economical option, at an estimated $400,000.