But some builders say they have now been left in the lurch halfway through projects.

ACT Planning Minister Mick Gentleman told an ACT Assembly hearing on Wednesday the decision affected a few hundred blocks in Canberra's older suburbs where development had been allowed despite single-dwelling rules in the area.

The loophole was a hangover from the late 1960s, when two dwellings - one house and a small flat - could be built on the blocks, as long as they looked like a single dwelling from the street.

That also meant the definition of "single-dwelling block" in the Territory Plan did not apply to these sites - along with the accompanying restrictions on plot ratio, block size, replacement dwellings and the number of dwellings in each building.

A variation of this definition -  which has been in interim effect since May - was introduced in response to complaints from the community that a number of multi-unit developments on such blocks conflicted with the overall character of their neighbourhoods.

Chief Planner Ben Ponton said the loophole had made it difficult for the planning directorate to assess development applications, as the usual rules did not apply. Proper analysis and planning for higher-density housing in those areas, including around waste and stormwater infrastructure, had also not been done, he said.

But Canberra Liberal Mark Parton likened the decision to changing the speed limit while cars were already driving down a highway, citing correspondence from developers who claimed they were now facing financial hardship under the change.

"Does that strike you as fair?" he asked the minister.

A couple in their 50s and a young builder were among those whose projects had been put at risk under the variation, the inquiry has heard.

While the Master Builders Association has called for a transition period for those who can prove they have spent money progressing a development under the old rules, Mr Gentleman defended the decision to push through the change cold turkey.

"We don't make these decisions lightly ... [We wanted to] ensure that those people who might be considering doing this in the future are aware of the change in planning so we can do this straight away and ensure we have the right controls," he said.

Mr Ponton said that allowing some developments already in progress to go through under the old rules could result in housing that did not meet community expectations or government requirements.

"Yes it's possible to apply transitional arrangements but sometimes the hard decision has to be made as to what is the outcome that we're looking for for our city," he said.

"It's important to manage growth appropriately."

The variation was designed as an interim measure to prevent further "unconstrained multi-unit redevelopment" in Canberra's established suburbs until the completion of a wider review into the ACT's housing options - dubbed the Housing Choices project.

But the association has warned it sends a mixed message to industry as the Barr government looks towards more urban infill and considers changes to encourage people to subdivide their blocks.

The exact number of blocks affected by the old loophole has yet to be determined, Mr Ponton said.