The twin public housing towers at Waterloo would remain standing and new unit blocks would top 13 storeys, under a lower-density plan for the redeveloped estate put forward by the City of Sydney.

The NSW government wants to demolish the housing estate's existing apartments, including the Matavai and Turanga blocks, to make way for 6800 homes in buildings that will climb to 40 storeys.

The state government proposes towers up to 40 storeys and two parks for the Waterloo housing redevelopment. Credit:City of Sydney

But Sydney lord mayor Clover Moore is urging the government to dump its preferred masterplan for the site in the city's inner south to avoid creating an "urban disaster".

The council will on Friday reveal a lower-density proposal for 5300 homes at the 19-hectare site, which is owned by the state government.