The O'Farrell government will allow developers to leapfrog councils to get large projects approved under measures that will lead to unwanted, ad-hoc development, community and environment groups say.
But the property industry says the tool, proposed under new planning laws, will ensure "out of date" council restrictions do not stall big projects.
The planning regime overhaul, billed as the biggest in 33 years, rests on a hierarchy of intersecting local, regional and state strategies.
It will take several years for those plans to be aligned. In the meantime, developers will be allowed to seek special approval from the head of the Planning Department for projects that may be larger or higher-density than council rules allow.
Developers must successfully argue that while their proposal does not meet local council criteria, it is consistent with higher-level strategies for an area.
Property Council NSW executive director Glenn Byres said it provided an "essential tool", especially for large projects which are more likely to exceed council controls.
"The last thing the system needs is to become clogged, and investment to stall during the implementation period [of the planning laws]," he said. "Local plans … are often well behind where the market is or where contemporary planning should be. That is just a recipe for investment to stall."
More than one third of the 5000 submissions received on the planning changes addressed this new approval pathway, known as "strategic compatibility certificates".
Bowing to strong criticism from councils, environment groups and the public, the government redrafted the changes so regional planning panels will decide on a certificate application if a local council does not support it, or more than 25 public objections are received. Applications would also go on public exhibition.
Nature Conservation Council NSW chief executive Pepe Clarke said residents would have to be "eternally vigilant" to ensure local planning laws - which govern height, density and scale - were not ignored. The certificates will be available indefinitely, in the event that regional or state strategies are updated.
Greens MP David Shoebridge said the rules created "a pro-developer free for all".
He cited Parramatta Road, which is earmarked for "regeneration opportunities" under Sydney's draft metropolitan strategy. "This would allow developers to [argue] the local planning controls should be ignored … making this entire area ripe for over-development," he said.
Better Planning Network convenor Corinne Fisher said referring applications to regional planning panels was "not a solution" because they consist mostly of ministerial appointments, which undermined their independence.
Local Government NSW president Keith Rhoades, whose organisation initially opposed the certificates, said it was now comfortable because the system better involved councils and communities.