Half of Wellington City Council's social housing tenants could be in for a rent cut if policy changes are approved.

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Councillors will be asked to approve public consultation on a proposed fairer rent system for city housing tenants, to provide some financial relief for tenants on lower incomes.

If approved, consultation will start in mid-March and run for four weeks, as part of a draft Social Housing Policy.

Under the proposal, tenants on lower incomes could get up to 40 percent discount on the market rent, depending on their income.

Currently, most tenants get a 30 percent discount based on what their rent would cost, if their home was rented on the open market.

The council said tenants who receive a Jobseeker benefit or similar will benefit most.

Some tenants on higher incomes will pay higher rent than they current do, depending on their circumstances, but most will still pay less rent than they would if they rented their home on the open market, it said.

The proposal also lessens requirements for tenants to move out within a year if their income exceeds the limit, and will instead take into consideration the tenant's health, wellbeing and community ties.

"The current rent-setting system causes hardship to some of our lowest-income tenants because it does not take account of their income and other circumstances," said Councillor Fleur Fitzsimons, who holds the housing portfolio.

"We would like to hear people's views on the proposed changes that will benefit the majority of our tenants and leave them with more money to spend on life's other essentials."

Council tenants are not currently eligible for the Income Related Rent Subsidy that Kāinga Ora and Community Housing Providers tenants receive to make rents more affordable and the housing sustainable, Wellington Mayor Andy Foster said.

"Councils continue to actively advocate to the government to address this inequity."

The proposed rent-setting system will generate an additional $1.5 million in rental income for City Housing, which will be used to keep the service running, the council said.

Some rent discounts will also be scrapped if the proposal succeeds, including rental caps, the affordable rent limit and rent freezes for tenants over 80 years old.

The council says the new rent system will render these discounts null because the new system is "fairer" and based on income and circumstances.

Councillors will meet next Thursday to consider the proposal.