The news will be welcomed by the large number of Canberrans who have already voiced opposition to the plan to allow dual occupancy and unit title on cleared Fluffy blocks, and by construction industry groups who say the proposal doesn't go far enough.

The government proposed the Territory Plan change so it can maximise the sale price for the land, offsetting the cost of buying and demolishing up to 1022 asbestos-contaminated homes.

The planning department recommended the go-ahead, but rather than ticking it off, Planning Minister Mick Gentleman has referred it to an Assembly committee, which will hold an inquiry.

Submissions will be called on Friday, closing August 27, with public hearings in September.

The news comes as the ACT Liberals called for wider debate on whether dual occupancy should be brought back to Canberra's suburbs.

Liberals planning spokesman Alistair Coe accused the government of ad hoc planning on the run with the proposal to allow Fluffy blocks to be split.

"We should be looking at dual occupancy policy across Canberra, not just on select blocks from which the government is trying to derive profit," he said. "It's very hard from a planning point of view to justify why there could be two blocks next to each other of the same size that have totally different planning controls due to the special treatment the government has given to their own blocks."

The proposal to allow dual occupancy and separate titles on Fluffy blocks of just 700 square metres could see dramatic redevelopment of some streets, with Fluffy houses concentrated in pockets. Twelve streets have six or more Fluffy homes.

The Inner South Community Council wrote to Mr Gentleman this week, urging him to rethink the Fluffy change, saying it would "degrade RZ1 zones irreversibly".

"If unit titling is good enough for Mr Fluffy blocks, why not for all blocks over 700 square metres? This logic is hard to fault and developers are likely to keep agitating for a change to the planning rules until all 700 square metre blocks can be unit titled," chairman Gary Kent wrote.

He also questioned the ethics of "one law for the government and another for everyone else".

"The government will be able to subdivide their blocks and sell them or redevelop them. The current leaseholders will not, neither will their neighbours who will be affected by adjacent multi-unit developments. This is not good governance, and could lead to a public perception that planning rules serve little purpose beyond delivering a privileged position to the Government in the real estate market."

The carving up of residential blocks has long been controversial in Canberra. At the moment, blocks of 800 square metres can have dual occupancies but the two homes can't be divided into two titles and sold separately in the standard residential zone. The Fluffy change will allow separate titles and reduce the block size to 700 square metres.

Mr Coe said there was no justification for separate rules for Fluffy blocks, a view echoed by many in the housing industry.

"I've got no problem with dual occupancies but it has to be the right blocks of the right size and in the right location, so we need to have a discussion about that," he said.

"Broadly speaking, I think a lot of people are comfortable with dual occupancy developments or other small-scaled redevelopments or additions close to local centres.

"Where community concerns tend to arise is where you have umpteen blocks amalgamated and a massive structure with basement carparking and windowless brick walls. It's those developments which change the character of a street, not so much tasteful dual occupancies."