This week the state government's planning department approved a proposal for a 150-home estate bounded by Silverwood, Birch, Brunskill and Mitchell roads.

The department's determination was that the planning proposal to reduce the minimum lot sizes proceed with conditions and Wagga council could now put it out for exhibition.

Wagga mayor Greg Conkey said this outcome is a positive move for the city, which will require more housing options than what is currently available to keep up with future growth.

He said the council has been working closely with the landholders for quite sometime and to have this project take a step forward was good to see.

"There is a land shortage in the city and this is going to open-up a number of blocks in a popular area of the city, close to the lake and shopping centre," he said.

The planning proposal stated the precinct will provide "a unique semi-rural character" and "opportunities to develop under-utilised land" connected to existing infrastructure networks.

It stated there is "a significant shortfall" in supply of rural and other large residential lots in the city, despite there being a strong demand.

"The proposal will assist in balancing the supply and type of residential land across the city as there is limited remaining stock of available land to develop at the density proposed," the proposal stated.

The planning proposal said the land has a good connection to existing open space, as well as pedestrian and cycling networks that link to key recreation and neighbourhood businesses including Rawlings Park and Lake Albert Village.

"Additional dwellings in this area will help sustain local neighbourhood businesses, make more efficient use of existing schools, daycare centres, health and fitness centres, and build stronger community well-being within the Lake Albert local area," the proposal stated.

It said the site was elevated and outside of any natural hazard area and will allow flexibility in design with sufficient land available.

Cr Conkey said he believed an extension of Lake Albert will receive strong support with the infrastructure already established to cater for future residents if the project progressed.

"It's a popular area, a growing area and we've been making allowances as far as Lake Albert is concerned. I am sure these blocks will be in demand," he said.

This plan for Lake Albert follows recent planning proposals to see more growth at Forest Hill and a new neighbourhood in the city's northern suburbs.