Labour has urged the Conservative Party to repay a £12,000 donation it received from a developer 14 days after Housing Secretary Robert Jenrick approved a £1bn building project.
Shadow housing secretary Steve Reed said the decision raised concerns over a possible “cash-for-favours” culture.
And the Lib Dems want an investigation into the minister’s conduct.
But the government said Mr Jenrick had acted with propriety and retained the PM’s “full confidence”.
On 14 January, the housing secretary granted permission for Richard Desmond’s company Northern & Shell to build on the Westferry Printworks site on east London’s Isle of Dogs.
The businessman – a former owner of the Daily Express – made a personal donation to the Conservatives two weeks later, on 28 January.
Mr Jenrick’s approval for the Westferry scheme came the day before the introduction of a new council community levy, which would have meant the company paying an additional £40m.
It has also emerged that Mr Desmond and Mr Jenrick sat at the same table at a Conservative Party fundraising dinner last November.
Labour asked an urgent question in the House of Commons on Thursday, but Mr Jenrick did not appear – instead junior housing minister Chris Pincher responded for the government.
Mr Pincher said Mr Jenrick had acted properly and with propriety over the 1,500-home project.
He told MPs he had “no idea what Mr Desmond asked for at that dinner” but Mr Jenrick had made it “absolutely clear” that “he could not discuss planning matters, that he would not discuss that planning matter and the issue was closed”.
Ministers “do not know what donations or funds are being spent by donors on political parties,” he added.
But Mr Reed told MPs: “This sequence of events raises grave concerns about cash for favours.”
He later said the Conservative Party should return the £12,000 to Mr Desmond and accused Mr Jenrick of avoiding scrutiny by not going to the Commons.
“Instead of answering questions about his behaviour, Robert Jenrick sent in a junior minister to speak on his behalf while he apparently laid low in the tea room.
“This attempt to avoid scrutiny shows contempt for the public who are concerned about the integrity of the planning process,” said Mr Reed.
He said the government should publish all correspondence relating to the case “so the public can see the true reasons for his decision”.
Acting Liberal Democrat leader Sir Ed Davey has written to the UK’s top civil servant, Cabinet Secretary Sir Mark Sedwill, to demand an investigation into Mr Jenrick’s conduct in relation to the planning decision.
He said that, if the housing secretary was found to have broken the ministerial code, he must resign.
For the SNP, Alan Brown accused the government of “defending the indefensible”, telling MPs: “This is a matter that simply stinks.”
Defending Mr Jenrick’s absence from the Commons chamber, the prime minister’s official spokesman said: “It’s appropriate for the housing minister to respond to a question on housing and planning matters.”
The spokesman said he was “not aware of any plans” for an investigation into any alleged breach of the ministerial code.
And sources close to Mr Jenrick said he would take questions from MPs during his usual Commons time slot next Monday.
In approving the Isle of Dogs project, Mr Jenrick overruled the government’s planning inspectorate.
Tower Hamlets Council has since challenged the decision, forcing the secretary of state to back down and to admit what he did was “unlawful by reason of apparent bias”.
Mr Jenrick has insisted there was no actual bias towards Mr Desmond – a former donor to Labour and UKIP – but said it was right for the decision to be revisited to “ensure there was complete fairness”.
A Department of Housing, Communities and Local Government spokesman said that, while “we reject the suggestion there was any actual bias in the decision, we have agreed that the application will be re-determined.”