Prime Minister Anthony Albanese announced 1.2 million new homes would be built in the next five years, starting from July 2024.
The new target is an extra 200,000 homes on top of what was previously pledged as part of the National Housing Accord target.
The Prime Minister said $3 billion would be used to support the states and territories to build the new homes.
Albanese said the performance-based funding would be a genuine incentive.
“An additional 200,000 homes with $3 billion allows for an incentive of $15,000 per additional home, over and above the one million that had previously been agreed to,” he said.
A $500 million housing support program would also be set up for local and state governments to boost housing supply in well-located areas.
Leaders also agreed to a suite of rental reforms, which involved moving to limit rent increases to once per year and implementing minimum rental standards.
The reforms included developing a nationwide policy that would require landlords to prove genuine and reasonable grounds for evicting tenants.
National cabinet also agreed to a new national planning reform blueprint, which would look at planning and zoning measures to increase housing supply.
As part of the blueprint, medium and high-density housing would be promoted in areas close to public transport, while approval pathways would be streamlined.