Speaking in Dapto, Minister for Finance and Employee Relations Damien Tudehope said that to address the housing affordability crisis in the Illawarra and around the state, planning rules could be updated to require affordable housing.

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"There are things that we can do in relation to the social housing market and that is have a planning system, which says to developers, in circumstances where you are getting planning permissions, how are you delivering as a component of that development, social and affordable housing," Minister Tudehope said.

As to how much should be set aside, the Minister said a figure of between 5 and 10 per cent would be appropriate.

"Developers ought to be looking at, in developing new sites, demonstrating that they are delivering a social and affordable housing option," he said.

The Minister's comments came as work gets underway on an affordable housing project in Dapto, targeted at women over 55.

Constructed by Anglicare, the project is one of the last in the NSW government's Social and Affordable Housing Fund, which provided $1 billion to deliver 3400 social and affordable dwellings.

CEO of the Housing Trust, Michele Adair said that there needed to be an ongoing supply of new, affordable housing to meet demand.

"We need a continuity of these sorts of programs so that NSW is going to be in a position to be able to fund at least 5000 homes per year, every year," she said.

The concept of mandating the inclusion of affordable housing in new developments, known as inclusionary zoning, has long been criticised by the development industry. When a similar proposal was approved in the City of Sydney, property developer lobbyist Tom Forrest, chief executive of industry group Urban Taskforce, said the change was a tax on new housing.

The NSW government had previously prohibited councils from instituting these schemes, knocking back a proposal from the City of Ryde earlier in 2021.

Ms Adair, said that there is no silver bullet, and that governments needed to invest in affordable housing to see it delivered.

"You can't have a subsidised housing without government subsidies."

The Illawarra is expected to require an additional 10,000 dwellings by 2036, according to projections completed for the Committee for Sydney think tank in 2018.

Currently, there is no requirement that a portion of these new dwellings be affordable for those on low incomes.

Ms Adair said that one in five new builds would need to be affordable to meet current and projected demand.

While some new developments in the Illawarra have included affordable housing, the Corrimal Cokeworks has proposed 6 per cent of dwellings to be affordable, others have eschewed selling housing below market prices, with the WIN Grand development including no affordable units.

According to Anglicare's rental affordability snapshot, over the weekend of March 19-20 2022, no rental properties in the Illawarra were affordable for people on income support payments, with only four affordable for those on the minimum wage.

Residents are expected to begin moving in to the new housing in Dapto from June 2023.

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