The Government was criticised by opposition parties after that was decided against. Dr Smith said costs would be passed on to tenants, with data on ceiling heat loss showing such a change would have a marginal impact.
Labour leader Andrew Little has his own Bill before Parliament, which would make it compulsory for all rental properties to have insulation, heating and ventilation.
Mr Little's Healthy Homes Guarantee Bill passed its first reading by one vote last month, with support from the Greens, New Zealand First, the Maori Party and United Future. National and Act voted against the bill.
The Labour leader said there was no point in having an insulated house if it was not heated properly.
If his Bill passed into law, landlords would have to upgrade underfloor and ceiling insulation to 2008 standards within five years for existing leases, or within a year for new leases.
The changes in Mr Little's bill would increase rents by an estimated $6 a week if the costs were spread over 20 years, the Labour Party estimated.
Dr Smith said heating was already covered in housing regulations.