The government recently announced it would cap section 94 levies payable by developers to councils without consulting local government. Blacktown councillor Allan Green said the only group that would benefit from the policy would be the big developers.

``This will greatly boost their profits by dramatically cutting their development costs,'' Mr Green said.

Opposition spokesman for planning and infrastructure Brad Hazzard said suggestions that councils may be forced to recover the shortfall through substantial increases in charges to ratepayers was unacceptable.

``We do not accept that the state government's capping of section 94 levies is the panacea for the critical problem of the lowest housing starts in over 50 years,'' Mr Hazzard said.

``Unless the state government engages local government in productive discussions to achieve a balanced outcome, it is likely that local governments' concerns and reluctance to approve new development applications will exacerbate the housing shortage.''