NSW Public Housing Minister Brad Hazzard says reforms to the sector will bring about a $22 billion “building bonanza” and redress long-term estate neglect.
Under the government's reforms announced, public housing estates will be redeveloped in partnership with the private and non-government sectors with a 70:30 ratio between private dwellings and social housing tenants.
Community housing providers will also take over 35 per cent of public housing management.
Yet the minister was forced to deny the government was privatising public housing, saying the focus was on unlocking land potential and creating better social outcomes.
Mr Hazzard said the mix of private and public dwellings would produce a range of community benefits.
"Crime drops, unemployment drops and the mix of housing sends a clear message to those in public housing, particularly those youngsters coming through, that getting a job, an education is an important part of life," Mr Hazzard said.
"It's a shift away from larger estates where we've had a great deal of social dysfunction. It will address a lot of those issues and ensure the community has a very positive approach to public housing."
The government will build or replace up to 23,500 public housing residences over the next decade while expanding support through private market rent subsidies, in the hope of getting families in crisis off the public housing waiting list.
Rent support will be increased from 27,000 subsidies to 37,000 within a decade.
Land will be either leased long-term or privately transferred to property developers to construct new housing in the form of apartment blocks and townhouses.
"A $22 billion boost to the economy will ensure a pipeline of development for NSW which will be fantastic for all of us," Mr Hazzard said.
Mr Hazzard said public housing tenants, such as the sick, poor and elderly, should not be compelled to live in dysfunctional areas, and should embrace these changes.
Tenants will be relocated while their communities are being redeveloped.
"By introducing the private market into those areas and making sure we have modern, new, very attractive facilities, it dramatically impacts on the negative aspects and heightens the good aspects," Mr Hazzard said.
The government may also seek to automatically deduct rent from Centrelink payments to prevent tenants from facing eviction, but conceded it required Commonwealth approval for this policy to eventuate.
Rental bonds will also be imposed on public housing tenants for the first time from the second half of 2016.
Mission Australia CEO Catherine Yeomans applauded the government's whole-of-community approach but felt the government should insist more firmly on affordable housing construction.
"It's disappointing that the government has not used the opportunity to introduce inclusionary zoning throughout NSW with a requirement for a proportion of affordable housing to be included in all major residential developments," Ms Yeomans said.
"When land value increases through planning changes, part of that value should be captured for the public good."
Sixty thousand households are currently on the public housing waiting list.