Premier Peter Gutwein has not ruled out increasing the first home builder grant as builders lobby him to double it to $40,000.
Mr Gutwein said since announcing his "aggressive construction" program on Friday he was surprised how many builders had his mobile phone number and had contacted him over the weekend.
He agreed that building homes was good for the broader economy and said he would take advice from Treasury on whether the grant should be increased
"I'll await that advice and once I've got that advice to hand we'll have a look at what areas, we would invest in and what stimulus levers we would pull," Mr Gutwein said.
"One area that I do very firmly believe would be very good for both jobs but also our broader economy is the construction sector, especially in terms of homes.
"If you're building homes the aggregate demand across your economy actually rises because you've got people employed that are spending money in other shops and on other purchases as well."
Greens leader Cassy O'Connor said the call for the home builder grant to be increased was worth considering but wants the emphasis on increasing affordable housing through a more comprehensive "rent-to-buy scheme".
"An expanded Housing Tasmania HomeShare or housing equity scheme could help thousands of low income Tasmanians into home ownership, tackling the housing crisis and delivering a pipeline of works for the residential construction industry," Ms O'Connor said.
"A targeted statewide home equity scheme would help to lift low income workers out of the rental poverty trap and provide a strong financial foundation for life.
"The pandemic response provides the opportunity for a fresh start on housing. We can't allow ourselves to walk back in to the extremes of the housing crisis."
Labor's treasury spokesman David O'Byrne said the call for the grant should be considered but cautioned against a "sugar hit" from the government.
He said Labor's housing policy was about creating jobs and the government should be focused on diversifying the economy.
"As a small economy, we are particularly vulnerable to economic shock when one sector experiences a downturn, or a major employer shuts down," Mr O'Byrne said.
"That's why a strategic approach is needed, not just to rebuild industries and sectors, but to deliver diversity and sustainable recovery."
Economist Saul Eslake said he was "normally not a fan of cash grants (or stamp duty concessions) to first home buyers" because they pushed up house prices and ended in the pockets of vendors or builders.
But he said because of the circumstances with the pandemic and job losses, increasing the grant to stimulate the economic recovery, an increase could be justified.
Mr Eslake cautioned against doubling the grant.
"I'm not persuaded that they need to be doubled - $40,000 would represent almost 12 per cent of the average price of a house in regional Tasmania - which would be a pretty generous 'gift' to people who wouldn't be buying a property unless they expected it to go up in value over time.
"I would also add, however, that whatever increase is made available should be restricted to people buying new homes and it should be very strictly time-limited, for example not available beyond 30 June or 31 December next year.
Master Builders Tasmania executive director, Matthew Pollock, said a survey of builders across the state showed a 30 to 50 per cent drop in work in the pipeline for the next six to 12 months.
"We've never seen anything like it before," Mr Pollock said.
"We're hovering over a cliff in the deterioration in works in the pipeline.
"Home ownership has long term social benefits and is where the biggest share of wealth is for low and middle income earners."
Mr Pollock said the biggest barrier to home ownership was the deposit and doubling the first home builder grant would help kick-start the economy.
"We know that for every $1 million spent on construction, $2.9 million in output is generated in the economy. That is money which goes into the retail shops, hotels, restaurants, and bars which have suffered the most," he said.
"Let's take this opportunity to build a fairer housing sector and let the building sector take the lead in rebuilding our economy."