Social housing tenants in Wellington city are facing a rent hike after the Christmas break.

As part of its annual rent review, Wellington City Council is now asking its tenants throughout the city to supply up to three months of bank statements - or face paying market-rate rents.

The council is trying to weed out tenants who are abusing the system, by looking for other income sources in their bank accounts, which would take the tenant over the threshold for subsidised housing.

The new request has left many tenants, such as Central Park Apartment resident, Malcolm Yeates, confused and shocked.

The council letter states: "Thank you for returning your tenancy review form, however you did not include some of the information we require ... please provide bank statements for each of your bank accounts .. if you do not supply this information by February 5, your rent subsidy will be removed and the amount you pay will increase to $300."

The tenants currently pay 70 per cent of the market rate.

If no statements were provided, the council would assume the household earnings were higher than the set maximum.

If the tenant was found to be no longer eligible for council housing, after 12 months, they would be issued with a 90-day notice, the letter said.

Yeates, who was irate after receiving his letter, said at first he did not understand what he had done wrong.

For the past seven years, it was his usual routine, during the annual rent review, to fill out the paperwork and supply proof of income from Work and Income and post it to the council.

"Then the letter came back saying they wanted my bank statements, so I went a got another print out from WINZ for them.

"Private landlords or employers would not demand three months of bank statements, so why should these guys? I think I speak for us all, I sort of feel they have already delved into our private lives as much as they need to."

One tenant, who did not want to named out of fear of repercussions, was asked for statements for his inactive bank account, which he had now given to the council.

However, he wondered how the council staff knew he had another account because neither he nor the bank had informed them.

City housing manager Michelle Riwai said: "Our waiting list is growing and we try to house those most in need first. Our new approach is the result of instances in recent years where we have found a number of cases where tenants have been less than forthcoming with details about their true financial status.

Collecting copies of bank statements gives us a better picture of income and assets. We want to assure tenants that they are free to 'redact' details of their outgoing expenditure from their banks statements. We stress we are not interested in how tenants spend their money."

The council had taken advice on privacy issues and may tweak some of the wording in the letters and forms being sent to tenants.

She had been been assured it was reasonable to ask for the financial information it was seeking, aimed at ensuring tenants met the low-income and asset criteria.

A spokesman for the Privacy Commissioner said they were in discussions with the council and were working with it to find ways to lessen the privacy impact.

"We understand the council seeks to verify the level of income that a tenant receives to see if they continue to qualify or be eligible for social housing – and we are encouraging the council to explore ways of doing this so that other financial information is not collected, such as, for instance, information on how a tenant might spend their income (on items other than rent)."

A spokeswoman from Wellington Central MP Grant Robertson's office said council tenants were calling into the office daily to complain - many of them in tears.