Port Stephens MP Kate Washington has ruled out Tomaree Lodge for residential development, despite it being included in an audit of government land with housing potential.
Premier Chris Minns ordered his ministers to compile a list of unused Crown land which could be redeveloped to ease the state's housing crisis.
The Sydney Morning Herald reported on Thursday that briefings to Housing Minister Rose Jackson showed the audit had identified more than 3000 government-owned sites across NSW, including Tomaree Lodge, the Stockton Centre and Morisset Hospital.
Government agencies are paring down the initial list of identified sites, and Ms Washington said Tomaree Lodge was among those which would not be on the shortlist.
"That audit's under way, but, to be really clear, Tomaree Lodge might be on the list, but it's certainly not on the list for any residential development," she said.
"The commitment we made going in to the election and that we have confirmed since is that the Tomaree Lodge site is for public use and will remain public land and in public hands to be used by community.
"It won't be developed by us or anyone for housing."
Community organisation Tomaree Headland Heritage Group has proposed transforming the former disability care centre into an education and tourism precinct.
Group spokesman Peter Clough said he welcomed Ms Washington's assurance that the site would not be redeveloped for housing.
Ms Washington said the government was still examining whether the Stockton Centre could be used for crisis housing while planning continued on its long-term future.
Newcastle and Port Stephens councils have a joint strategy for Fern Bay and Stockton which includes redeveloping the former disability centre for housing.
Morisset Hospital has been proposed as a future housing site for at least 10 years.
The Newcastle Herald reported in 2013 that Lake Macquarie City Council had rejected a NSW Health proposal to rezone the site for housing.
The government has placed on hold housing rezoning plans for Broadmeadow in light of Newcastle MP Tim Crakanthorp's referral to ICAC after it was earmarked as one of 12 suburbs in NSW, and the only one outside Sydney, for fast-tracked residential development.
