There will be a review on the accommodation supplement for state rentals to stop people being able to live in subsidised housing for free, the Government reveals.

Housing Minister Phil Heatley told TV3's The Nation that the Government was seriously concerned with the $1.2 billion spent on housing supplements, as well as the $600 million that went on state house rental subsidies.

"We are reviewing it because we think it probably can be targeted better. For example you know when you've got someone in a state house getting a really cheap rent, you know 80 bucks a week, and then they have boarders who get the accommodation supplement, you know that household could be getting that state house almost for free,'' he said.

He hoped that the Government would have a direction for the plan by the end of the year.

The Government did not have any intention of returning to market-related rents which the previous National government introduced in 1991, Mr Heatley said.

The Government also wanted changes in planning regulations so more land could be opened up for building, improving the affordability of new housing in cities such as Auckland.

"Essentially we need more supplies so we need more houses and we need more sections,'' he said.

"Extending city limits to provide for more sections should be done in combination with subdividing large properties within existing city limits.''

Consent costs for subdividing existing land were too high, he said.

- APNZ