The largest release of housing lots in 20 years will bring home ownership within reach for thousands of young families, the state government says.
Up to 171,000 new homes will be built across 31 new and existing suburbs, alongside land for new jobs, shops, schools and transport.
We want to make home ownership, particularly the ownership of a backyard, a reality again.
The government says it will address a severe housing shortage that has locked many would-be buyers out of the market but would not guarantee the plan will meet Sydney's thirst for new homes.
It will also make the final decision on land to be rezoned – despite a pre-election promise that planning powers would be returned to communities – raising fears that plans will be rammed through without local support.
The government has promised "housing types to suit all budgets" will be built in existing suburbs and new areas at the city's fringe. Construction will begin next year.
They will be built along new rail and light rail links and coincide with major road projects including the M5 west widening and WestConnex.
Premier Barry O'Farrell said the government wanted to "make home ownership a reality again".
"The more blocks of land we can release, the greater downward pressure we can put on housing because it's been so high for so long," he said.
It follows warnings that a lost generation of would-be home buyers is looming, unable to ever purchase a home, unless the government acts now to save them.
The associate director of BIS Shrapnel, Kim Hawtrey, told a forecasting conference on Thursday that "something needs to be done to get this generation back into the housing market".
It came after the release of new figures from the Australian Bureau of Statistics showing the number of first-home loan approvals in NSW had dropped 63 per cent since the government scrapped the $7000 First Home Owner Grant for existing properties.
Mr O'Farrell said government measures to cut red tape, release land and boost builder and homebuyer confidence lifted housing completions in Sydney last year to more than 18,000, the highest level since 2006.
The government says around 27,400 extra homes will be needed each year.
The Planning Minister, Brad Hazzard, would not guarantee that the latest program would meet that need.
"We are aiming to achieve the target, if possible. I can guarantee that there is more effort going in to provide a mix of housing and downward pressure on prices for renters and home purchasers than has happened in more than a decade," he said.
As Fairfax Media reported on Friday, eight existing urban areas, including Randwick and Ryde, have been earmarked for high-rise apartment blocks up to 30 storeys high to provide 30,000 homes.
The program also includes 27,000 homes around eight new railway stations along the North West Rail Link including Kellyville and Castle Hill. Land will be rezoned at precincts near those rail lines to provide a further 30,000 new homes, and planning will start for more homes around the North West Growth Centre.
Seven undeveloped sites at the city's fringe will also be closely examined.
Other sites to be considered could lead to a further 60,000 homes at suburbs including Wilton, where the federal government is assessing the viability of a second Sydney airport. Mr O'Farrell does not support that option.
Mr Hazzard said the government would have the final say on rezoning decisions, but would consult closely with councils and the community.
Randwick's Labor mayor, Tony Bowen, has said its council had "no input whatsoever" in nominating its two precincts. Auburn City Council likened the process to the "removal of local planning powers and decision making from council by the State Government".
But Hornsby mayor Steve Russell said he did not oppose the plan, as long as local governments had a central role.
Infrastructure will partly be funded through developer levies, however Mr Hazzard said changes to existing contributions schemes were being considered.