Lake Macquarie City Council voted on Monday to place the draft Killingworth Paper Subdivision Area Plan on exhibition for 28 days.

The area was rezoned in 2015 from RU6 Transition to R2 Low Density Residential and was identified as an Urban Release Area as part of this rezoning. An area plan is required for the land before consent can be granted for development.

The patch contains 24 lots, half of which are owned by council. The remainder are held by eight private owners. But two councillors raised concerns that a pair of private lots outside the proposed area could be negatively impacted and said council would be the biggest beneficiary of the plan.

Councillor John Gilbert asked staff whether those two sites could be included in the plan, but was told they were not rezoned in 2015 and would need to comply with environmental protection zoning.

He also asked if there was consideration given to compensating the land owners due to the "disadvantage" of not being included.

"Because there would have to be disadvantage if they're outside the area plan because they're not going to be able to develop and this plan is all about getting these sites developable," Cr Gilbert said.

Councillor Kevin Baker asked about a potential land swap with the lot owners.

"It gives the land owner a developable lot and gives council an environmental offset," he said.

Staff said council had been progressively acquiring the lots over the past few decades, but were unaware of if there were any current negotiations with the lot owners.

Cr Baker said he wasn't confident he was across the detail enough based on information provided, and put up an amendment for the matter to be deferred.

But other councillors said the exhibition period would allow more time for information and pointed out the paper subdivision has existed since 1901.

"Council has been going through a process of systematically cleaning up various paper subdivisions we've inherited from quite some time ago," councillor Jason Pauling said.

"Have we got all the information in front of us? No we don't, but at a principle level are we generally agreed that we need to tidy up the paper subdivisions that have been around for quite some time? Yes we do.

"Despite a little bit of jumping in shadows potentially, is there likely to be something here sufficiently malicious to want us to not progress with sorting out this paper subdivision? I just can't see it. If it does, certainly it will come up in the 28-day exhibition."

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