Within the next year, terraces, townhouses and dual occupancy dwellings are likely to start popping up in Sydney's middle ring – a vast expanse of suburbs stretching from the northern beaches through Parramatta, the Canterbury-Bankstown region and down to Botany Bay – if new guidelines released by Planning Minister Rob Stokes proceed.

Middle-ring suburbs have traditionally provided the setting for the "quarter-acre block" and, in recent years, also for multi-storey apartment buildings.

But Mr Stokes' new guidelines, contained in the draft Medium Density Housing Code, reflect an attempt by the government to promote a middle-ground of smaller yet denser developments which he believes could hold the key to alleviating Sydney's housing affordability crisis.

"This is very much pointing to what the Sydney of the future might look like," Mr Stokes said. "There will continue to be a lot of detached housing stock ... but it is very clear we need a greater diversity in housing types."

A 50-year ban on terraces, which lasted until 1962, had created a "massive gap in supply for what we now know is one of the most adaptable, efficient and delightful forms of houses we have," Mr Stokes said.

Sydney's middle-ring suburbs where highrise apartments potentially threatened "the existing character of the suburbs and were becoming increasingly unaffordable" stood to benefit most from new terrace housing, he said.

Released last week, the draft guidelines provide councils and planners with design rules to help fast-track approvals for terrace and terrace-style dwellings.

The goal is to make this type of housing cheaper and easier to build, giving Sydney residents searching for new properties an alternative to either apartment living or a stand-alone house – a pattern of development which Mr Stokes said had placed Sydney at risk of becoming a "two-tone city".

The draft code is open for public feedback until December, but the planning minister has ultimate control over the final version, which Mr Stokes is expected to sign off on by early next year.

The impact on the market will be swift, he said, with new terrace-style housing on the ground in as little as 12 months.

The code's design guidelines have been widely welcomed by the urban planning and housing sectors.

"We could see Sydney change again," Stephen Albin, CEO of Urban Development Institute of Australia NSW, said, providing "the community wants this sort of option".

If welcomed by the public, Mr Albin said the first "green shoots" of new terrace housing may appear soon, but it could take "up to three years before we see it really take off".

David Bare, executive director of Housing Industry Association NSW, said the guidelines were a "logical step" which would give Sydneysiders greater choice and affordability in the housing market.

"If we're able to see a modest increase in medium density [dwellings] in Sydney's middle-ring suburbs, that in itself would go a long way to deal with housing supply issues and affordability in Sydney."

According to the government's figures, there is room for almost 280,000 terraces and other medium density dwellings under present zoning, with potential largely concentrated in the middle-ring suburbs. This is about a third of the necessary 724,000 new homes that Sydney is expected to need by 2036.

While the guidelines provide a clear path for developers, smaller developments comprising two to six terraces would be preferable to large-scale projects, according to Shaun Carter, the president of the NSW chapter of the Australian Institute of Architects.

"We [want] to get as many architects designing as many terraces as we can. This will provide variety in terrace house design which will make for a more interesting landscape.

"Our existing terrace houses have been with us for over 130 years and they have served us well because we got them right."

Failure to do the same, he said, risks living "with the mistake for at least another 100 years".