A controversial housing project in Sydney's North West has been put on ice because of the traffic congestion it would cause.

Hornsby Council has voted to stop processing the proposal for 2,900 new homes at South Dural, unless the State Government stumps up millions of dollars for local road improvements.

Hornsby Mayor Steve Russell said the Council was forced to draw a line in the sand.

"We had about 5,000 letters of objection, and the main issue is that New Line Road is at capacity," he said.

"It is coming under more and more pressure every day as new housing estates are approved in the Hills and Blacktown City Council.

"Unless the State Government's going to address these issues ... we have to stop anything further from putting pressure on the roads."

The decision affects the proposal to build on 240 hectares of land currently zoned rural, which includes Blackbutt and Ironbark forests.

The proponent, Lyon Group and Folkestone Joint Venture, says it will comprise detached, multi-unit and residential flat buildings.

Spokesman for Folkstone Ben Dodwell said the land had not been significantly productive for some decades.

"The facts are we have about 150 lazy five-acre lots of land owners that no longer need the space [...] and they are becoming increasingly concerned that younger people and older people can't move into the area," he said.

He said the pause would cause expense but the council's decision was not all bad.

"This rezoning proposal has put change and the need for infrastructure investment particularly in relation to the roads on the agenda, which I think is a good thing," he said.

The decision affects the proposal to build on 240 hectares of land currently zoned rural ( Supplied: APP )

'No great need' for additional housing

The Government is unlikely to stump up for road improvements even though it is trying to increase housing supply and choice — to address home affordability concerns.

South Dural is not a priority precinct for new housing in the Greater Sydney Commission's Draft Northern District Plan.

In fact, the plan's list of sustainability priorities discourages urban development in the Metropolitan Rural Area.

The decision is a partial victory for the Galston Residents' Association who want the project dumped altogether.

Secretary John Inshaw said the proposal was never meant to cost the State Government a cent and is "unnecessary and illogical".

"There's no great need for the additional housing because Council's already over-subscribed its quota for the State Government," he said.

"It's important that we preserve our rural area for its amenity and for its agricultural potential and for its jobs."

Mr Inshaw, whose group sponsors the Respect Rural web page, said "we will not give up until [the plan] is completely finished with".