Water, Property and Housing Minister Melinda Pavey said the modified concept plan for the Newleaf Bonnyrigg housing estate - which will see an additional 500 homes built - will continue to "transform the local community and enhance liveability."
The state government has approved plans to deliver 20 per cent more homes, new open space and additional community facilities on the 81-hectare site.
Of the 500 homes, 150 will be social homes and 350 private homes to be sold to cover a majority of the project's $225 million delivery cost.
The plan, which was put forward by the NSW Land and Housing Corporation (LAHC), allows maximum building heights of up to six storeys and is part of the state government's COVID-19 Recovery Plan.
The 18-stage development will now bring a total of 3000 new homes to Bonnyrigg, including 900 designated for social housing, after it was identified for redevelopment and renewal after the 833 original dwellings, built in the late 1970s and 1980s, reached their practical use by date.
"Bonnyrigg's ongoing redevelopment continues to transform the local community and enhance liveability, by replacing outdated social housing with a mix of new social, affordable and private homes in an area of high demand," Mrs Pavey said.
"This project continues to help meet the community's changing needs by building one and two bedroom apartments close to the Bonnyrigg Town Centre Precinct, along with attractive and usable public spaces for all residents to access and enjoy."
Planning and Public Spaces Minister Rob Stokes said the project "strikes the right balance" of social and private housing. The first five stages have seen 548 new homes, including 212 social ones, be built. Another 142 homes are currently underway in stages 6 and 7 which is being managed by Landcom. The remaining homes will be delivered over the next 15 years, in stages 8-18.
"The modification means there'll be more trees, covering 25 per cent of the development site and an increase of open space from 12 to 13 hectares," Mr Stokes said.
"More than four kilometres of new pedestrian and cycle paths will be delivered as part of the development that will make this area far more accessible and enjoyable for residents."