The councillors voted on July 23 to adopt a planning proposal to rezone the 40-hectare piece of land, known as 14 Popplewell Road, from its current E2 environmental conservation zone to R3 medium density residential.

The former rifle range was purchased by Defence Housing Australia (DHA) from the Department of Defence in 2015.

The site has a central road dividing relatively disturbed area of vegetation to the south and intact vegetation area adjoining Worimi lands to the north.

The tabled document describes the site as being subject to illegal access by recreational vehicles, while not facilitating appropriate access to the beach and bushland for the public.

"Being one of the few vacant, developable areas within range of the Williamstown RAAF base and centres such as Newcastle CBD, Stockton, and Fern Bay, the site is significantly underutilised," the report said.

DHA general manager, property provisioning group's Brett Jorgensen said it was expected that the footprint for the housing development would generally be within the area of the former rifle range, which was previously cleared by the Defence.

"The development will provide housing for Defence personnel and families and will also include sales to investors."

At the meeting, Port councillors expressed their concerns over the need to upgrade the nearby intersection of Nelson Bay Road and Vardon Road, where the area's public school and community centre are sited.

Mr Jorgensen said that an upgrade to the Vardon/Nelson Bay roads intersection was being investigated in conjunction with the Roads and Maritime Services.

The medium density zoning on the site would allow for maximum building heights of 9m and 15m, and minimum lot sizes of 200sqm and 500sqm, the report stated.

"A concept master plan was developed to demonstrate how a sensitive residential development could be achieved in the context of the rezoning, facilitating approximately 300 lots and associated infrastructure such as green space, roads and footpaths. "

The council report said that the draft Fern Bay and North Stockton Strategy was still being prepared in collaboration with Newcastle council.

"On May 28, Port Stephens Council deferred a decision to place the draft strategy on public exhibition at the request of Newcastle in order to arrange a joint workshop."

Councillors agreed to adopt the planning proposal to amend the land zoning map, height of building map and lot size map under the Port Stephens LEP; to forward the proposal to the NSW Department of Planning to seek a Gateway determination and request delegated authority to make the plan; and to place the draft DCP on public exhibition.