Many uniformed staff were posted away from their families at managed isolation facilities around the country - and hiking rental prices would increase their stress.
Lots of Defence houses were in the old state house design, he said.
"One shouldn't look at it as being luxurious accommodation by any means."
The increase starts from April and will affect staff who live in homes owned by the Defence Force and in barracks on military bases.
Rents on a one-bedroom house will increase by $67.50 to $215 a week, rent for a two-bedroom house increase to $240, three bedrooms will cost $272.50, rent for four bedrooms will be $310, while the rent for a five-bedroom home will rise by $107.50 to $355.
Defence Force chief people officer Liz Huckerby said rents for housing and barrack accommodation were renegotiated with Inland Revenue every three years.
"Due to significant increases in the New Zealand rental market over the past three-year period, the new Defence housing rates do represent an increase on current rents.
"However, they still offer a significant discount from market rates for most locations.
"NZDF recognises that this increase to accommodation rates may be difficult news for some personnel who are also managing financial challenges associated with the Covid-19 pandemic."
The new rental rates will be locked in for three years.