Plans to turn the empty land bordering Prince, Sale and Dalton streets into a multi-storey residential complex of units and apartments with a central park have been approved by Orange City Council.

The council-owned site will be put up for sale to developers to build the complex in keeping with council's approved planning controls.

Council supported a push by Cr Stephen Nugent to ensure it includes social and affordable housing.

Cr Nugent told council there was a major shortage of rental housing in Orange for people with low incomes or suffering from mental health issues.

"There is just not rental properties available for them at an affordable price," he said.

"It is really difficult to find somewhere to live if you are on a low to moderate income."

He said the hospital site was an ideal opportunity to create affordable housing near the CBD.

"This is a really important development in Orange," he said.

"I had seen this particular development as a fantastic opportunity to incorporate some social and affordable housing into a new development at a location which is very close, in walking distance, to the CBD. People do not necessarily need to have a car to get around."

He said it should not be left to developers to consider including affordable housing in the complex.

"I think sometimes you have to force the market to provide social and affordable housing," Cr Nugent said.

Cr Tony Mileto also called for a taxi drop-off zone to be provided at the site to assist the residents and ease concerns by neighbours about too much on-street parking.

Cr Kevin Duffy said he opposed the development as he believed it should be a park.

Council also heard concerns the development might overshadow the adjacent Department of Planning, Industry and Environment building.

The DPIE'S Caroline Myers told council's public open forum only a laneway would separate some residences from the building which had been designed to allow plenty of natural light in.

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