The discovery of a squatters' camp after a massive blaze at an industrial building in inner Sydney yesterday has sparked calls for a parliamentary inquiry into illegal housing.

Firefighters rescued 16 young people believed to be from Japan and Korea after the fire began at an Alexandria industrial complex in the early hours of Wednesday morning.

The City of Sydney is investigating the property's owner, Masaaki Imaeda, over allegations of unauthorised use of the site.

Yesterday Mr Imaeda would only answer 'No' when asked if he had people living at the complex, although advertisements found online indicated residents were paying at least $100 a week to live in squalid conditions.

The council said it examined more than 1,000 similar complaints in the past 12 months.

Homelessness New South Wales chief executive Gary Moore said high rents were pushing people into marginal accommodation.

He said there should be a parliamentary inquiry into the issue.

"Everyone, including the Government, can understand the scale of the illegal and marginal housing market in New South Wales," Mr Moore said.

"You need a roof over your head, you need some safety and security and of course in some of these living situations, witnessed in the near tragedy, these safety and security conditions are very, very lax."

Rangers 'too stretched' to enforce rules

At least one City of Sydney councillor said a lack of enforcement was contributing to the issue.

Labor Councillor Linda Scott said the council has only six rangers to check the suburbs within its boundaries, which were home to around 180,000 people.

"The City of Sydney, in my view, does not have enough rangers to ensure that we can be proactive about going out and checking reports, checking sites where we are seeing instances where there are too many people living in the one area," she said.

On Wednesday Fire and Rescue NSW Commissioner Greg Mullins said those living at the site could have been killed if firefighters had not realised they were there.

"I'm outraged that there would be something like this in the heart of Sydney. It looks like somebody has been taking advantage of these people," he said.

Vicki Bonneville ran a catering business from the site, which she said yesterday had been completely destroyed by the flames.

She said she had previously provided information to the City of Sydney about Mr Imaeda operating illegal accomodation, but the council denied ever receiving complaints.

"I'd see him with two, three, four people walking down, looking at the caravans and the buses and I was appalled. I did say to him, 'This isn't right'," Ms Bonneville said.