This week's decision raises the per-block tax that developers pay into the council's Western Corridor Local Infrastructure Contributions Plan from $13,788 to $25,550.

The levy applies to what lord mayor Nuatali Nelmes referred to as the "only greenfield site in the city", an area covering two large proposed subdivisions near Minmi which promise to add 3000 houses and 9000 people to the city's western fringe.

The levy will raise $75 million to help pay for community infrastructure such as road upgrades, sports fields and community centres.

The new policy replaces a 2014 plan which identified $37.95 million in required infrastructure spending for the same number of houses.

Urban Development Institute of Australia state chief executive officer Steve Mann wrote to Cr Nelmes this week arguing developers had paid $12 million into the first plan over six years but the council had spent only $300,000 of it, including $9000 last year.

"Council has not delivered significant components of the identified infrastructure in the existing Western Corridor plan to date and in our view has not adequately justified the increases in the Plan," he wrote.

Winten Property Group plans to build a 2000-lot subdivision straddling the Newcastle and Lake Macquarie council areas near the M1 motorway, and 1200 lots are on the drawing board for the nearby Xstrata Coal site.

Tuesday night's decision brings Newcastle's developer fees into line with the corresponding levies in Lake Macquarie and Port Stephens.

Independent councillors John Church and Kath Elliott opposed the levy increase, warning it would be passed on to home buyers and reduce housing affordability.

Cr Nelmes turned this argument on its head by reasoning that, without the rise, Newcastle would be offering a "discount" which would not be passed on to buyers.

She said rejecting the increase would be a "disservice ... to the future of that community" and an as-yet "unborn child" on the Newcastle side of the proposed estates could reasonably ask "why on my side of this development do I not have a BMX facility, a cycleway, why is my intersection not upgraded?"

Greens councillor John Mackenzie said the higher levy, which dropped from a proposed $30,274 to $25,550 after community consultation, achieved a satisfactory balance between banking for future infrastructure needs and housing affordability.

Newcastle residential developer levies are capped at $20,000, but the council has written to the Planning Minister asking for the cap to be increased to $30,000 in the western corridor.

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