The NSW government wants to rezone more than 240 hectares of land it owns at Fennell Bay for a potential 565-lot development.
Lake Macquarie council will on Tuesday night consider a planning proposal from Landcom, the government's land and property development arm, to rezone land on Old Main Road and Corella Close, Fennell Bay and Toronto Road, Woodrising.
The land, to the south of Billy's Lookout, stretches across the Central Coast and Newcastle railway line and cuts back towards Teralba on the western side of the line.
A council staff report prepared for tonight's meeting of the development and planning standing committee says Landcom has a draft concept plan for a "compact urban development" on the eastern half of the site.
"Landcom have undertaken preliminary investigation work on the site looking at constraints and opportunities and have identified the potential for the site to accommodate approximately 565 lots with a mixture of small lots and low and medium density housing, as well as a component of affordable housing," the report says.
The proposal seeks to change the zoning from RU6 Transition and E3 Environmental Management to R2 Low Density, R3 Medium Density Residential and E2 Environmental Conservation.
It also considers the creation of a small local centre business zone to serve the needs of future residents.
The staff report recommends council proceeds with the planning proposal and requests a Gateway Determination from the Department of Planning to continue the rezoning process.
A further report would be presented to council once land-use studies and consultation between government agencies had occurred and a proposed zoning plan had been developed.
An indicative zoning map suggests 79 per cent (190 hectares) of the land would remain as bush land while about 11 per cent (25 hectares) would be developed.
Landcom's concept plan states 140 lots would be between 200-300 square metres, 355 lots would be between 300-450 square metres and 70 lots would be between 450-600 square metres.
The land was slated as a housing release area in the Greater Newcastle Metropolitan Plan last year.
Its development would assist in meeting the plan's projected 13,700 new dwellings in Lake Macquarie by 2036.
Medium density housing makes up only 4.9 per cent of the existing housing stock in Fennell Bay, while 95.1 per cent is separate houses.
The report notes the site has access to the arterial road network and is within close proximity to Booragul and Fassifern train stations.
Two threatened flora species and eight threatened fauna species have been identified on the site.