But the federal agency responsible for managing the funding to address the issue is underperforming.
At least 1857 new houses will need to be built to address the existing overcrowding issues and a further 74 will be needed each year to keep up with population growth.
In 2018, a $550 million federal government funding commitment over five years expected to provide 650 three-bedroom houses in remote communities.
The funding is administered to the NT government to implement the builds by the National Indigenous Australian Agency.
But as of September 2021 just 121 three-bedroom houses - or 19 per cent of the target - had been completed.
The report found the agency needs to improve its effectiveness in managing and distributing the funding.
It also found that while the NIAA focused on increasing the number of completed houses, it has not ensured the housing meets required standards, is delivered by local Indigenous people and businesses, or has local decision making processes inform construction.
While the NT government committed to matching the federal government's financial contribution, the report also found the NIAA has not yet gained an assurance that commitment will be met.
The agency has agreed to implement all five recommendations from the audit office to improve the remote housing supply program.
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