Mick Gentleman told an ACT Assembly hearing on Tuesday that he raised three children in a Calwell home approximately that size and his childhood home was even smaller.

"My three children, my wife and I all sustained ourselves in 120 square-metre three-bedroom home in Calwell. It's a very enjoyable house, and my kids have grown up well," he said.

"In my early years of growing up in Canberra ... we grew up in an 80-square-metre house, a two-bedroom FCC home in Reid. So I think it is an opportunity to grow up and have a family in that size residence."

Under the ACT government's new RZ1 dual occupancy policy, a second separately titled dwelling will be allowed on any block of more than 800 square metres in an RZ1 zone.

It cannot be bigger than 120 square metres.

An analysis commissioned by The Canberra Times suggested that 40 per cent of Canberra's RZ1 blocks would be eligible under the new policy.

On Friday, ACT Chief Minister Andrew Barr declared that he lives in a 120-square-metre "ex-govie" Dickson home with his husband and "very large cat".

"That's enormous," he said.

"At four- to five-thousand dollars per square metre to construct, how is a 250-square-metre house going to be affordable for anyone who has affordability challenges?

"If we just go on building the biggest houses in the world we're not going to improve housing affordability."

Mr Gentleman was responding to questions from opposition spokesperson for planning and land management, Peter Cain.

"How are young families who are already struggling with the ACT housing market meant to fit in what is essentially a 120 square-metre large granny flat?" he asked.

"Why limit the size when there could be a house provided for a larger family than even your own that is required really for the comfort of their family to be bigger than 120 square-metres?"

Chief Planning Executive Ben Ponton said the policy would provide affordable housing, particularly for first-home owners or downsizers.

"It is providing the incentive for people to invest in a more affordable product [for people wanting] freestanding homes. So that provides that opportunity but still making government policy of accommodating standard growth within the existing footprint," he said.

The ACT builds the largest homes in the country, according to a 2020 Commonwealth Bank home size trends report.

The report also said Australia builds the biggest houses and apartments in the world.

The average new house built in Australia in 2019 to 2020 was 236 square-metres, while apartments were 137 square-metres.

Mr Cain said that a 2015 housing choices survey found Canberrans wanted to live in large freestanding homes.

Mr Ponton said he was involved in the survey.

"There was no constraints. If you had all the money in the world, you didn't care about the environment, you didn't care about emissions and you didn't care about anything else, what's your preference?" he said.

"People were saying that they would like a freestanding home.

"But we got them to start thinking about other considerations. What if this means we have to spread the city and go into environmentally sensitive areas?"

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"We've done further work and engagement to better understand people's preferences, and I think that feeling of we can't just do things the way we've always done it still resonates with the broader Canberra community."

Mr Cain has called for a follow-up housing choices survey.