NSW Premier Barry O'Farrell has defended the government's decision to announce an increase in public housing rents because of the carbon tax.
A day after Community Services Minister Pru Goward told parliament rents would be increasing, Mr O'Farrell said the carbon tax would cost the state $8 billion, the amount it estimates it may have reaped from selling electricity generators.
Mr O'Farrell said that as NSW wasn't being compensated for the hit to the value of state-owned generators, it would have to raise venue by putting up public housing rents.
"We're passing on costs that are being imposed on the state government by Labor's carbon tax," he told reporters in Sydney's west on Friday.
"Not to do so ... would reduce the funds available to the state government to built more public housing needed because of the massive housing waiting list we inherited from the former government.
"The carbon tax is going to cost the state $8 billion. Those costs have to be met."
But Prime Minister Julia Gillard said he was lining his pockets at the expense of people in public housing.
"Premier O'Farrell has decided that he wants to reach in to the pockets of pensioners and grab some money for himself," she told reporters.
"There is no excuse for this conduct by Premier O'Farrell and any attempt to blame it on federal government policies is just a con."
Shelter NSW - the state's advocacy body for affordable housing - has called on the state government to reconsider its position.
It also wants a consistent approach to determine what sources of income should be used to calculate rents.