In a report to be presented to Tuesday night's council meeting, council staff have recommended the reclassification process begin in relation to four properties at Gerringong, Kiama and Kiama Downs.

Last year, after a recommendation from the council's revenue subcommittee, Kiama councillors spent $24,000 on a geotechnical assessment of Iluka Reserve.

The reserve, covering about 1.5 hectares, is community land located on the eastern side of Riverside Drive, along the section that formed part of the Princes Highway before the opening of the North Kiama bypass. It extends to the Flinders Avenue tennis courts.

Kiama Mayor Brian Petschler said the section of land now earmarked for housing was an area in the north of the reserve away from a section of "uncontrolled fill", with a small part already zoned for housing. The existing playground area would require relocation.

Cr Petschler said at this stage there was no formal plan for residential blocks, but the proposal would leave a substantial part of the reserve intact.

Any funds generated from the land sales would be put towards capital works and infrastructure.

"The reason for this is we are in a pretty significant period of belt tightening," Cr Petschler said.

"If it was being heavily used this wouldn't be considered, but Iluka Reserve has ongoing maintenance costs for the community."

If endorsed by councillors at Tuesday night's meeting, the reclassification will be placed on public exhibition and a public hearing will be required.

The other lots in question include a parcel of land on the corner of Fern Street and Willawa Avenue, which is used for overflow parking for the Gerringong Uniting Church, land adjoining the western end of Michael Cronin Oval and a small reserve off Irvine Street, Kiama.