Sydney-based developer Level 33's plan to construct a high-rise building on Akuna Street is a step closer to reality after the NSW Government decreed it has been granted State Significant Development status.

The Government on Friday announced a list of sites throughout NSW that have been rated as state significant, which means that the developers can apply to the Housing Delivery Authority for increased height limits.

Kiama Council allowed a maximum of six storeys for the Level 33 proposal but the developer now has the option of increasing the size and scope of its plan.

The HDA is allowing the developer to go beyond the six-storey limit to the eight-storey range for the complex which could house two supermarkets.

Managing director Eddy Haddad recently told The Bugle that they were confident that the proposed $66 million proposal would “deliver a landmark development for Kiama that will enhance the town centre, including significant retail activation and additional retail and resident car parking”.

Level 33 had been engaged in a long-running legal battle with Council in the Land and Environment Court case but recently withdrew its objections.

It is understood that the HDA made a recommendation to Planning Minister Paul Scully, who then declared the project a State Significant Development.

Local residents and business owners are concerned Kiama does not have the infrastructure in place to cope with a rapid increase in developments such as this one, plus two other multi-storey proposals for Akuna Street and the Council-owned Shoalhaven Street Precinct which could result in 450 homes being built in an eight-storey development opposite Kiama Bowls Club.

Kiama MP Katelin McInerney, who had described the potential for a 14-storey development as “completely inappropriate” for the town, and Mayor Cameron McDonald wrote to Scully to voice their opposition to the project going above the already imposed height limits.

Cr McDonald issued a statement on Friday to express his disappointment with the NSW Government's decision.

“Like many in our community will be, I’m disappointed by this decision,” Cr McDonald said.

“Council has recently adopted planning controls for the Kiama town centre that reflect extensive community consultation and set a six-storey height limit for this site.

“The state’s decision to advance an eight-storey proposal is not consistent with those locally adopted controls and community expectations.

“Housing delivery matters, but so does getting the right outcome for Kiama.

"Development in the heart of our town must respect our local character, amenity, infrastructure capacity and the plans our community has helped shape.”

Council has effectively been sidelined by Level 33 going through the HDA process.

“With the project now in the state’s SSD pathway, Council’s role is largely to make submissions and represent the community’s concerns through the formal process and we will do that clearly and strongly," Cr McDonald added.

“I want our community to know this: Council will stand with you at the appropriate time and will continue to advocate for an outcome that is consistent with Kiama’s planned town centre future.”

There will be a formal public exhibition period next year and Cr McDonald is encouraging community members to lodge a submission directly with the NSW Government, outlining their views and concerns.

A total of 19 projects were given SSD status on Friday with 15 in metropolitan Sydney and four in regional NSW.

The Department of Planning, Housing and Infrastructure said that if lodged and approved, this could create more than 3807 homes, including much-needed affordable housing.

This brings the number of SSD proposals to 308 which could yield more than 102,000 potential homes.

The Akuna Street site was sold by Council to Level 33 in late 2022 for $28 million.

The dilapidated area of the old Kiama Independent newspaper headquarters has been decimated by vandals and squatters with abandoned cars, smashed glass and graffiti throughout the site.

Level 33 closed down the car park due to safety concerns recently but reopened access a few hours later and will allow motorists to park there for another month before it gets shut down permanently.