Council's decision on Tuesday night to refuse a social housing development on Lantana Place, just two weeks after approving it, has highlighted a need for major policy changes, councillors told the meeting.

A Housing Plus development application for 10 social and affordable homes in north Orange was overturned after eight residents pleaded with councillors to reject it.

The residents said they feared the introduction of social housing residents in their area would lead to rising crime rates, increased anti-social behaviour, a loss of privacy, a fall in housing prices and over-development of the planned site.

Housing Plus project director Justin Cantelo said they were "surprised and disappointed" by the reversal.

"We are looking into our options in regards to our future developments in Orange," he said.

Cr Jeff Whitton said placing social housing in established residential areas was not the answer for Orange.

He said developers of new estates should be required to save a portion of the land for social housing.

"We need public housing, but it is about where you put it," he said.

"You can't put public housing into existing development estates because it is not fair."

He said it was putting residents' welfare at risk.

"When new subdivisions are being developed, the developer is to put aside lots for public housing, pre-sale of those [other] lots. It's the same way as we do with greenspace [and waterways].

"The developer probably won't like that because they know it is probably going to impact their ability to sell lots around that area.

"But bad luck, they either want the whole development or they don't."

Cr Glenn Taylor said council was repeatedly hearing resident protests about social housing projects.

"We are going over this time and time again," he said.

"We need to address this recurring problem. The model is not working.

"The model you are pushing is totally flawed," he said.

Cr Kevin Duffy said the original approval had not considered public interest. He said the residents had worked hard to pay their mortgages and be part of that community and should not be stressed by social housing moving in.

"There is no way in the world am I not going to support those people in any shape or form," he said.

Cr Joanne McRae said the Housing Plus development complied with planning regulations and should continue to be approved.

She said people who needed social housing should not be ignored. "We can't all wish they move to Bathurst or Dubbo," she said.

Council voted 8-3 (Cr Jason Hamling was absent) to rescind the original motion.

It then voted the same way to refuse the Housing Plus development application on grounds of social, economic and traffic impacts and on public interest.

Councillors McRae, Tony Mileto and Stephen Nugent voted in favour of the Housing Plus development in both votes.

Four Housing Plus representatives, including CEO David Fisher, addressed the council meeting during the public forum, calling on the councillors to continue to support the development.

On Wednesday the social housing group said it was unclear what council's policy now was on social housing.

Project director Justin Cantelo said the decision would have a "significant impact" on the 200 people on the social housing waiting list in Orange.

"It is not clear from last night's debate whether or not council has made a policy decision to refuse all social and affordable housing applications proposed for construction within an established area," he said.

"We were surprised and disappointed that a compliant development that has council officer's recommendation that has previously been approved by councillors has now been refused.

"We certainly support the development of the Orange City Council Local Housing Strategy, however we ask what the council plans to do now, in the short term, to provide safe and affordable homes for the people on that waiting list."