A proposal to rezone part of the suburb between the Windale and Mount Hutton shops, which Windale social housing tenants and a residents' group had expressed concern about, was approved late last year.

The zoning of the area, which includes 151 government houses, changed from low to medium-density residential, opening the door for decades-old single-dwelling properties to be redeveloped into townhouses or units.

No government houses have been sold since the rezoning, but the NSW Land and Housing Corporation is considering its options for the subject properties.

"As a significant landholder in the rezoning area, LAHC is holding preliminary talks with [Lake Macquarie] council to explore any potential future redevelopment opportunities, to deliver optimal outcomes for current and future social housing tenants and NSW taxpayers," a Land and Housing Corporation spokesperson said.

"LAHC is aware of council's desire for more housing diversity in Windale; in particular, one and two bedroom homes that can meet the changing demographics of social housing tenants.

"LAHC renews ageing social housing assets that are no longer meeting tenants' needs, and are more expensive to maintain, in order to build more new, fit-for-purpose homes."

The comments are the first public confirmation that redevelopment is likely to occur. The spokesperson said the LAHC had "no formal plans" and "community consultation" would be conducted ahead of any proposal being lodged with council.

Last March, Charlestown MP Jodie Harrison called for the government to reveal its plans for the future of social housing in Windale, saying residents of the 151 homes did "not know their fate".

A month earlier, Property Minister Melinda Pavey said the government would be "crazy not to look at maximising opportunities for better social housing" in the area.