Families will need to move 50 kilometres, not the 100 kilometres previously required, when they relocate from a metropolitan area to a regional town to access the grant.

The changes to the $10.4 million scheme are designed to capture more families, and encourage residents living in Penrith to shift to Lithgow, for example, which is 87 kilometres away.

Relocating from Newcastle to Singleton (80 kilometres) or from Wollongong to Nowra (80 kilometres) will also qualify for the grant under the new rules.

The only catch is the new home cannot be in a neighbouring council area.

More than $2.2 million remains unspent after 1166 grants were given to families moving from the city to the bush this financial year.

The relocation program was an election promise designed to boost the population of regional towns, but has failed to meet a target of 40,000 families over four years.

In January, the scheme was expanded to include long-term renters as well as home owners. Modelling by the Office of State Revenue discovered residents in outer suburbs, such as Penrith, were missing out under the 100-kilometre rule.

Deputy Premier Andrew Stoner relaxed the distance requirement last week.

Wendy Hawkes, 39, moved to Lithgow in 2007 as a teacher because of the cheap rent. She enjoys the informal lifestyle.

She easily found a place to live in an old Welsh miner's cottage.

''I made friends very quickly. The community embraced me and I was happy to be here. It is a very safe city and I have no problems walking down the main street at night,'' she said.

Ms Hawkes works as the cultural development officer for Lithgow Council, after completing a masters of arts administration. More people are moving to Lithgow from Sydney, often commuting part-time on a daily train service dubbed the ''Bathurst Bullet''.

The train departs Bathurst at 5.49am and arrives in the city at 9.30am. ''Most people just jump on and sleep,'' Ms Hawkes said.