The deed commits City of Newcastle to re-invest rates the state government's Land and Housing Corporation pays for properties it owns in the city, which the corporation will be required to match.

The funds will be used to build new social and affordable housing properties in the city. This will be in addition to the housing corporation's existing social housing redevelopment program.

Council will make an initial payment of $1.69 million, followed by instalments in 2024 and 2025.

It is anticipated council's total contribution will be about $6 million over the three-year period, which will create a total of $12 million when combined with the state government's matched contribution.

The agreement, which council says is the first of its kind in NSW, comes after a memorandum of understanding signed by the two parties last year.

Lord mayor Nuatali Nelmes originated the idea with former NSW Housing Minister Melinda Pavey in an effort to expedite the delivery of more social and affordable housing in the city.

There are currently 1277 people on the waitlist for a social housing property in Newcastle, and the waiting time for a home is at least 5-10 years.

Cr Nelmes said she was aware council's level of resources wouldn't fix the problem but "the lag effect of wall to wall conservative governments in NSW for quite some time has led to a lack of provision in this space".

"It will provide with our intent an extra $12 million in our city for provision of social and affordable housing," she said.

"That's a big deal for local government to actually ensure that we are providing that housing."

Greens councillors Charlotte McCabe and John Mackenzie said while they were proud that council was taking the initiative, they also decried the state government for not doing more, forcing council to pick up the slack.

"[This] might be the first time that council is giving a grant to the state government," Cr Mackenzie said.

Liberal councillor Jenny Barrie said Newcastle was "not the first council to provide housing" and believed stakeholders should be looking at repurposing existing properties rather than just building new ones.

Labor councillor Elizabeth Adamczyk said there was a mismatch between the types of existing social and affordable homes available and the people who need them.

"Of the more than 4000 dwellings that LAHC owns across Newcastle the average age of properties is 56 years for houses, 44 years for apartments," she said.

"The demographics of people needing social housing has changed over time. Decades ago when these homes were built they were built as three and four bedroom homes for families with multiple people in their household.

"The people on the waitlist for social housing now are predominantly single and two person households.

"This funding deed will support the identification of projects that will be rebuilt with this in mind."

Labor councillor Carol Duncan also added an additional part to the motion to ensure scheduled bulk waste collection from social and affordable housing properties in Newcastle meets community expectations as rubbish is occasionally left on footpaths in front of the homes and not organised for collection.

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