The rezoning near the Canberra Airport flight path has sparked cheers and uproar. The federal and ACT governments oppose the project, and the airport says it represents a backflip from NSW Premier Barry O'Farrell's government.

Village Building Company managing director Bob Winnel said Queanbeyan had been starved of affordable housing and the decision meant young families could get into the housing market.

''The rezoning of Tralee will restore jobs, growth and opportunity to the families and businesses of Jerrabomberra and Queanbeyan,'' Mr Winnel said.

But Canberra Airport is fiercely opposed to the rezoning, adamant complaints about aircraft noise will stymie development of the hub.

Airport managing director Stephen Byron - who suggested the Melbourne Cup day timing of the announcement was a cynical move - said the decision would be an albatross around the government's neck.

''They said they would clean up NSW, but this is a decision that mimics their predecessors, in fact it is the decision the previous government wanted to make, but the opposition opposed it. What's changed?'' Mr Byron said.

The approval leaves the NSW government's plans for Canberra to host Sydney's second airport alternative in tatters.

Mr O'Farrell has repeatedly rebuked calls for a second airport in Sydney and has said the expansion of Canberra Airport, accompanied by a very fast train, was his preferred option.

But NSW Planning Minister Brad Hazzard is touting the South Tralee approval as a ''win-win'' solution, saying rezoning would not stop Canberra Airport's growth or loss of its 24-hour, curfew-free passenger and freight hub.

Tralee's potential development footprint, which included a new town centre, had been reduced by about 20 per cent to restrict housing to low-noise areas.

''Any future housing development in South Tralee will be well outside the potential aircraft noise contours known as Australian Noise Exposure Forecasts set by the federal government,'' he said.

''Housing is normally allowed up to 25ANEF around Australian airports.''

Other measures stipulated for the project include:

■ All new houses to be insulated against aircraft noise (a requirement exceeding NSW planning law and the relevant Australian Standard).

■ Queanbeyan Council must notify all new South Tralee residents of the potential for aircraft noise and activity in the area.

■ Recreational activities will be provided in an open space buffer zone, between the new development and adjoining industrial area.

ACT Chief Minister Katy Gallagher fears Tralee will hinder plans to transform the airport into a regional transport hub.

''Whilst it may fix a shorter-term issue around development on the [ACT-NSW] border, I think the longer-term impacts will be regretted,'' Ms Gallagher said.

Federal Transport Minister Anthony Albanese said Mr O'Farrell had undermined his own support for Canberra alleviating the need for a second Sydney airport. ''It defies common sense that he's killed off his own idea, however absurd it might have been in the first place,'' he said. ''The federal government remains opposed to putting new greenfield housing developments under busy flight paths.''

But Mr Hazzard said, ''we need this rezoning to allow more homes to be built''.

''Currently the median house price in Queanbeyan has reached around $580,000 - the same as Sydney - while average rents are around $460 per week,'' he said.

He rejected Mr Byron's claims that in opposition he had railed against the project, along with Mr O'Farrell, and said he was neither for or against it at that stage.

Releasing copies of Hansard which record Mr Hazzard's accusation of the Labor Party accepting a $164,000 donation from Village Building Company, Mr Byron said that when in opposition Mr Hazzard had joined Mr O'Farrell and Andrew Stoner railing again the Tralee rezoning. ''They thought it was a scandal that a development tainted by political donations should be approved.''

Monaro MP John Barilaro also welcomed the decision. ''Clearly there is a housing supply problem,'' he said.

The Urban Development Institute of Australia NSW is also behind the rezoning. Chief executive Stephen Albin said that Queanbeyan's housing affordability problem was the perfect example of a wider phenomenon in NSW.