The Government is reviewing the accommodation supplement.

Housing Minister Phil Heatley told TV3's "The Nation" this weekend that the Government was seriously concerned about the $1.2 billion a year cost of the supplement along with the $600 million that went on state house rental subsidies.

"We are reviewing it because we think it probably can be targeted better" he said.

" 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.

"We're looking at this at the moment.

"I'd say by the back end of the year Ministers will get a good feel of where we're going to head with this."

But he said the Government had no intention of returning to the market related rents introduced by the previous National Government in 1991.

And he indicated the Government wanted to see changes in planning regulations covering housing in cities like Auckland to provide more sections in a bid improve the affordability of new housing.

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

"First of all release more new land for housing, so greenfields.

"Most cities have you know some low unproductive land that they could release for housing." Extending city limits to provide for more sections should be done in combination with subdividing large properties within existing city limits.

He said consent costs for subdivisions of existing sections were too high "and that's crazy".