The state government could charge levies of around $20,000 per dwelling on tens of thousands of new homes to be built on a stretch of central Sydney from Westmead through Parramatta and Olympic Park to Strathfield.

The levies would help to fund schools, parks, light rail and roads through an area the government is hoping to expand by 70,000 new homes or more over the next 20 years.

While much of the area has already been subject to intense development and development speculation, Planning and Housing Minister Anthony Roberts said the combined area would be co-ordinated through one 20-year plan, which would also result in the creation of 110,000 jobs.

To fund the infrastructure needs of the area, a special infrastructure contribution will be levied on new homes across the region.

The size of that contribution has not been confirmed. However, the government has mooted a $20,000 levy per dwelling to help fund the Parramatta light rail line, and it is understood the contribution discussed on Tuesday would be similar.

The Department of Planning and Environment is also considering a two-tiered levy structure, to reflect the different land values across the region. Developers, however, have cautioned that the levies, which will come on top of council charges, could jeopardise potential housing projects or push up house prices.

Mr Roberts said he was "very excited" about the co-ordinated plan for the greater Parramatta region.

"I can guarantee that in 20 years' time there will be more open green space along the corridor than there is today," Mr Roberts said. He added that it would be "very unusual or even unheard of" for a minister in his position to be able to make such a promise.

The infrastructure levy will contribute to a schedule of projects to be detailed in the coming months. The projects will include parks, roads and schools, as well as the light rail line in the area. Mr Roberts said a "green grid" would be constructed along the Parramatta River foreshore with connected open spaces, walkways and cycleways.

The minister said the affordable housing policy suggested by the Greater Sydney Commission would apply in the area. That policy is for 5 to 10 per cent of the increased value of an area to be allocated toward affordable housing, to be rented to low- and middle-income earners.

"The 5 to 10 per cent will apply," said Mr Roberts. "But I would expect … I think there is capacity here to go a bit higher than that, and we will have a look at new options."

The infrastructure contribution levy will be in addition to funds raised by local councils from developers. The City of Parramatta, for instance, has proposed an ambitious 50 per cent levy on the value created by high-density residential rezoning in the Parramatta CBD.

The growth area announced on Tuesday will incorporate 12 precincts. These are: Westmead; Parramatta North; Parramatta CBD; Harris Park and Rosehill; Rydalmere; Carlingford Corridor (including Telopea and Dundas); Silverwater; Camellia; Sydney Olympic Park and Carter Street; Homebush; Parramatta Road; and Wentworth Point.

The Department of Planning and Environment has flagged the creation of a new primary school at Camellia.

As well as the light rail line – to be built in two stages through the region – there are also likely to be at least two stops built on a proposed West Metro rail project. The West Metro, to be built some time next decade, will link stops at Parramatta and Olympic Park with the Sydney central business district.

David Borger, the western Sydney director of the Sydney Business Chamber, said: "It's fair and reasonable that developers pay a contribution toward infrastructure and affordable housing, but what's not clear is how much they will have to pay.

"State and local government really need to work together on these fees and charges rather than running their own race," said Mr Borger.

Labor's planning spokesman, Michael Daley, said more should be done to supply affordable housing.

"You can build 72,000 dwellings but if you don't preserve some for middle- and low-income families they will all just go," Mr Daley said.

"You are putting forests of high rises across this corridor, changing the nature of these communities, and you are not really doing anything about first-home buyers," he said.

Chris Johnson, from the developer lobby group Urban Taskforce, said the "staggering array" of new levies would jeopardise housing supply.