Councils in New South Wales have welcomed the State Government’s decision to amend its proposed policy on development contributions.

Planning Minister Tony Kelly announced on Tuesday that a number of new measures would be introduced following consultations with key stakeholders.

The development contributions cap will remain at $20,000 for established areas, but in greenfield sites the cap will increase to $30,000. Existing plans that currently sit below the cap will not be affected by the increase.

The Minister also announced a $50 million fund over two years for priority infrastructure projects to assist local councils in approving housing developments in growth centres across the state.

Local Government Association president Genia McCaffery welcomed the Government’s decision to address development levies.

“We’ve had a series of meetings with the Planning Minister Tony Kelly to negotiate a logical and workable solution to this policy, so we’re pleased that he’s actually listened to and acted on most of our concerns,” Cr McCaffery said in a statement.

“All councils are in a much better position than they were a few months ago under the initial proposal.”

However, Cr McCaffery warned that several councils in fast growing areas still face a significant shortfall in funds.

“The NSW Government needs to continue to work with councils on solutions for funding basic community infrastructure now and in the future, and we’ll continue to put pressure on them to ensure they do so,” she said.

“We know this decision won’t be popular with the development industry but we need to think about our communities – they’re the ones who need to use the infrastructure funded by the contributions, so it’s vital we put their interests first.”

The development industry slammed the State Government’s decision to increase levies, with the Urban Taskforce claiming it would cost Western Sydney home buyers $1.8 billion and NSW home buyers $5.4 billion.

The Taskforce’s chief executive Aaron Gadiel said the “high cost” development levies would disadvantage home purchasers across the state.

“Less new homes will be built, those that are built will be more expensive, and fewer people will have the opportunity to own their own home,” Mr Gadiel said in a statement.

He added that NSW had hit a “record low level” in housing construction, caused by high development contributions.