THE state government is rushing to prepare laws to create a development authority with sweeping powers to compulsorily acquire and rezone privately owned land for resale to developers.

With Sydney's population set to grow 40 per cent to 6 million in the next 25 years, the government has decided it needs a metropolitan development authority to buy privately owned land near rail and bus routes for medium- and high-density housing.

Legislation for the new authority, believed to be the first of its kind in Australia, will be introduced before June in an attempt to increase housing construction rates, which are the lowest on record even though the city's population is growing at the fastest rate since the 1960s.

Cabinet is still fine-tuning details, including the contentious issue of the amount of compensation paid to landowners whose properties are compulsorily acquired by the government for resale.

While government departments such as the Roads and Traffic Authority have the power to compulsorily acquire land, they can do so only when it is used for a public purpose.