Finance Minister Bill English has hinted at changes in the Budget to make it easier for housing developers to build smaller and cheaper.

He was critical yesterday of Auckland Council planning rules that require new apartments to be at least 40sq m and balconies at least 8sq m.

He said it was adding to the cost of housing - $80 a week to rental costs - and there would be more in the Budget on May 15 to help the supply of housing.

"There is a bit much of a mentality that a small group of people in a council know what everyone wants and needs and it turns out ... that those preferences of a small group of people about what the city should look like mean real costs for real households," he said in a pre-Budget speech to the Wellington Employers' Chamber of Commerce.


A range of other rules set minimum subdivision size, ceiling heights, bedroom size and even the width of the front.

All pushed up the cost of housing.

"Local body planners and councillors are not aware of the wider social and economic effects of their complex rules and processes."

There were three consequences of higher house prices: pressure on interest rates hitting business and households; pressure on councils and Government for greater income assistance; and increasing inequality.

Asked later if he was happy for people to live in matchboxes, he said the 40sq m rule "cuts a whole lot of people out of affordable housing in the middle of Auckland".

"People have to live somewhere and they can choose not to live in something they think is too small."

Mr English said the Government would not be stepping in to make local decisions on house size.

"In the end councils have to make those decisions. But we just want to make sure that everyone understands that the choices made by the planning parts of your council have a real impact on family incomes.

"When everyone understands that, it might help change the nature of the choices."

Labour leader David Cunliffe said Mr English was engaging in "a ridiculous piece of buck-passing" in criticising the restrictions of apartment sizes and balconies when hundreds of thousands of New Zealanders were concerned about skyrocketing rents and rising mortgage interest rates.