Tamworth will expand outwards to the north and south as the city grows over the next 20 years, according to an updated state government planning document.
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The population of the New England North West is expected to grow to over 190,000 people by 2041, according to the New England North West regional plan.
The growth is likely to be concentrated in the cities of Armidale and Tamworth, which are expected to grow significantly. Smaller regional towns are forecast to shrink.
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All told, the region will need 7,700 more homes by 2041, the plan claims.
But under a dry climate change scenario, there could be 45 per cent less water available region-wide, on average, in the long run, it said.
Tamworth Regional Council plans to investigate making the biggest new land releases north of Oxley Vale and south of Burgmann's Lane, a map included in the plan shows.
The draft plan urges councils to approve new homes in built-up areas in the form of apartments and townhouses.
Integrated Planning Manager Genevieve Harrison said Tamworth Regional Council and the region's other councils now have the opportunity to consider the draft plan and potentially make comments on the details in the strategy.
"A very preliminary review by council staff indicates that the department has reflected the objectives and outcomes of the Blueprint 100 strategic planning process undertaken in 2019/2020," she said.
Bath Stewart registered surveyor David Lord said the city would only be able to grow if water supply issues were resolved.
"Tamworth's in a great spot, it's got a lot to offer, but there's the water supply," he said.
"Until they really resolve that, it won't happen."
Climate change will make existing water shortages dramatically more serious, the draft plan shows.
The New England North West is forecast to heat up about 0.7 degrees in the near future, rising to about 2.2 degrees in the far future.
"This means the regional economy is vulnerable to shocks from future droughts and climate change," the draft said.
"Using water more efficiently, investing in less climate dependent water sources and diversifying the regional economy so it is not so dependent on water is critical in helping the region's resilience to climate change."
The draft plan noted that "no additional water can be taken from rivers or groundwater sources to support growth in the region".
Tamworth MP Kevin Anderson urged locals to have their say on the draft plan, which is on public display until February 18, 2022.
"Job growth in our region remains a top priority, along with water security, and this is reflected in our investment in projects like the Tamworth Global Gateway Park, Gunnedah Saleyards and Dungowan Dam, as well as the significant investment we have seen in our regional road network," he said.
Planning minister Rob Stokes said the government had released the first New England North West Regional Plan in 2017 and the draft updated plan adds a "stronger focus on resilience off the back of bushfires and drought to ensure communities are prepared and responsive to natural hazards".
Minister Stokes said the draft plan was being updated to reflect changes in the region bought on by recent environmental challenges and major investments in industry and infrastructure.
"The New England North West will be a hub for agribusiness and renewable energy production and the draft plan includes strategies for how we would support each sector to thrive and co-exist," he said.
"We are also keen to get the community's feedback on strategies to roll out more electric vehicle charging stations as we move to reach net zero emissions by 2050."
If ultimately approved, the New England North West Regional Plan 2041 will govern actions by both local and state governments.
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