A brothel that horrified neighbours in a leafy Mt Eden street was operating from a house co-owned by a National MP.

Kanwal Bakshi, a first-term list MP who stood in Manukau East, said he gave notice to the tenants to move out last month after angry neighbours complained. His property manager investigated and issued a warning notice to tenants.

Bakshi acknowledged that he had not told his boss, Prime Minister John Key, that a brothel was operating out of one of his properties. Key, who has said he expects his MPs to disclose private problems to him, last night refused to comment.

But Auckland Mayor John Banks, whose office received complaints from neighbours and from Labour's Phil Goff, said such brothels had become a "growth industry" that was expensive to monitor and police. The council was receiving complaints about unlicensed brothels from neighbourhoods across the city, Banks said. "I would like the Government to stop sending down their bad decisions on local authorities to administer and fund."

There are 16 licensed brothels in Auckland City but there are no figures on the number of small, unlicensed brothels operating out of private homes.

One unlicensed brothel in Puriri Ave, Greenlane, has been given notice to stop operating by May 8 following complaints from residents.

Bakshi said he had been shocked to hear the neighbours' complaints about the brothel in his property: "Mt Eden is one of the nicest areas and I didn't expect anything like that." He added: "Within three weeks the property was vacated."

It's the third time the MP has faced controversy in a short political career. He resigned a company directorship last month amid allegations of a potential conflict of interest, and was the subject of an immigration service investigation last year about alleged job offers to Indian nationals.

A Shackleton Rd resident said living next door to the brothel had "just been horrific".

"I just felt terrified, I was too scared to leave my kids at home," she said. "This is a real family neighbourhood."

The resident said about 50 "middle-class" men visited the house every week. "You couldn't park in our street, it was always busy, lots of cars slowing down, looking for the address."

She had contacted the property manager several times before contacting Bakshi, who was helpful and acted quickly. But in the weeks before the tenants left, police were called to a brawl in the driveway.

The neighbour complained to the council and to local MP Phil Goff, who passed on her concerns to Banks.

Goff said he had complained on behalf of neighbours about the council's "tardy" response, unaware that the house was co-owned by Bakshi.

"Shackleton Rd is a very nice street and not where I'd expect a brothel operating, but I guess it shows they can operate anywhere," he said.

Late yesterday, Bakshi said he had never confirmed that the property was operating as a brothel, and his main concern had been the disruption to neighbours. "I can't say about anybody's profession, I didn't inquire."

Auckland City Council environments group manager Mark Vinall has written to Goff, "concerning the operation of a brothel in the vicinity of Shackleton Rd, Mt Eden".

He said the tenants had moved before officers had time to investigate, but that the brothel operator's contacts would be forwarded to the environmental health department to determine whether her new city premises were licensed.

Another neighbour said the house was recognisable in online advertisements for prostitutes, and was frequented by people who "weren't the nicest". He had complained to National MP Jackie Blue. "It should be in an area of town that's industrial or business, not in the middle of neighbourhoods."

Bakshi bought the property about four years ago with business partners Didar Chohan and Devinder Singh. It is understood to have been rented for about $700 a week.

In Auckland city, brothels can operate in residential areas if they qualify as a home-occupation business. That means the operator must live at the house, employ no more than four people, operate wholly within the premises but using only a third of the floor space, and have no more effect on the neighbourhood than a normal home.