After more than 20 years of fighting for Wyee's paper subdivision to be formally recognised as home sites, mostly during his 21 years as a Lake Macquarie councillor, Mr Piper has welcomed the NSW government's approved rezoning of the land from rural to residential.

It is one step closer to creating a further 1250 homes, including about 200 on lots that have been sitting in limbo since the turn of the last century.

"That's one major hurdle down, one to go," a jubilant Mr Piper said this week.

The history of Wyee, dubbed by residents as "the place where time stands still", is as lengthy and tortuous as the conundrum it has posed to authorities for more than 100 years.

"Yet Wyee could become a truly great place and it is ideally located for development. It is central to everything, it has Wyee railway station, and is also close to the F3," Mr Piper said.

The paper subdivision with lots 202 to 400 on deposited plan 7506, known as Wyee West, cannot be built on legally.

"The lack of roads and services, especially sewerage, has blocked legal home building for all these years, though about 50 of those lots have been built on illegally," Mr Piper said.

"These have been allowed to remain simply because enforcing their removal was perceived to be too difficult and controversial."

The approval embraces 164 hectares of land collectively owned by Wyee Development Fund (the dominant landowner), Lake Macquarie City Council, the NSW government, or individual owners of about 200 lots in the paper subdivision.

The rezoning creates about 117 hectares of residential land, with higher densities encouraged closer to the railway station.

It also sets aside another 45 hectares for environmental or conservation purposes, 1.6 hectares for open space, and 0.5 hectares for infrastructure.

In the 1990s, a plan by Mr Piper for block owners in the paper subdivision to partly fund their own infrastructure services was defeated when some owners refused to spend the money.

"But now we have legislation which means that if we get 60 per cent support from the owners, the rest will have no choice but to come in," Mr Piper said.

"They will all stand to make unusually strong capital gain out of this," he said.

This time round, Wyee Development Fund will make provision for their own sewerage plant.

Federal member for Charlton Greg Combet has also allocated $6.34 million to Lake Macquarie City Council through the Building Better Regional Communities Program for the sewerage.