The group, together with representatives of the Orana division of the Real Estate Institute of NSW (REINSW), is putting a case to NSW Government to implement a "flexible cost structure" for regional developments.

They claim this will prevent developers in the bush from being hit with the same offset costs as their city counterparts - costs of which they claim have been responsible for halting important projects that would have provided housing in regional areas suffering shortages.

The Biodiversity Offsets Scheme was established under the Biodiversity Conservation Act 2016, to mitigate the impact of development and clearing approvals on biodiversity. Impacts can be offset by the purchase or retirement of biodiversity credits, or payment to the Biodiversity Conservation Fund.

The NSW Government is undertaking a review of the Biodiversity Offsets Scheme, and the Country Mayors Association will be making a submission.

Mr Davies said they would be asking for a flexible cost structure for offsets - one that could be implemented at a local government level, and have projects incur offset costs of no more than 10 per cent of the total expenditure cost.

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Mr Davies said the scheme was causing "as much as $20,000 increases on house blocks in rural and regional NSW".

"We have a housing crisis across rural and regional NSW," he said, citing Dubbo, Narromine and Trangie as examples.

"You can't buy a house, you can't rent a house."

Mr Davies said it was currently a "golden era" in the opportunities for rural and regional NSW development, investment and job creation, with "12,000 permanent jobs being created" in the federal seat of Dubbo over the next decade.

However, he said there had been projects planned to deliver housing in vulnerable areas, which had been undermined by government policy.

Mr Davies cited examples in central and north west NSW in which the offsets scheme was halting economy-stimulating development, including a commercial development in Bourke where $48,000 blocks were hit with $480,000 offset costs per block, which "killed the project".

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"There was no investment, there's no development, there's no job creation. And again, we as a society fail the very people who are at the bottom of that society and trying to get a leg up," he told the Daily Liberal.

Another example involved a gypsum quarry in the local government area of Wentworth, a project which he said would have employed 25 people.

He said the biodiversity cost for the project was between eight and nine million - so it fell over.

Mr Davies called the offsets scheme "the biggest drawback to regional development that a government could come up with".

Laura Shooter, agent at SJ Shooter Real Estate and co-chair of REINSW Orana, said the scheme - specifically the cost of offset credits - was affecting accommodation projects to address the critical and worsening housing shortage.

She said the cost of offset credits had increased "exponentially and inexplicably" over the past couple of years and, due to the Orana region's comparatively low land values, "these costs make many important developments commercially unfeasible."

She stressed, however, that biodiversity was of great import to the future of Australia, and it was "the implementation [of the scheme] that's the issue, not the intent".

"This well intended, necessary legislation is having severely disproportionate adverse impacts for regional development and is contributing to the housing shortage. It's also threatening our agricultural capacity, and missing the mark on delivering genuine biodiversity outcomes," she said.

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Ms Shooter said though she thought there was a genuine desire among landholders, developers and community leaders to be "good environmental stewards", there was a lack of transparency or strategy in "how the millions of dollars raised through the offset credits are being used to promote and advance biosecurity and environmental issues".

Barbara Sutherland, who runs the Facebook group Save Our Street (SOS) Trees Dubbo, and is also a member of Healthy Rivers Dubbo and Dubbo Environment Group, said the Biodiversity Offsets Scheme is there to safeguard our native species.

"Since European settlement, over 80 species of plants and animals have become extinct, and over 1,000 are threatened with extinction. So it's a really serious problem for us all. That's why we have legislation," Ms Sutherland told the Daily Liberal.

She said it was "of the utmost concern to the whole community" that developers would want to lessen their responsibilities in this area.

"For them to bring that in line with our current housing shortage, the nexus to that is very, very slim. What we're talking about here is profits for developers, and not a reduction in our very real housing shortage," Ms Sutherland said.

"If the developers think that it's costing too much ... the fact that we're still losing those threatened species every year is the answer - that tells us what's happening here, and we can't afford it."

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She pointed to the NSW Auditor-General's findings from 2022, that the review of the scheme was required to address issues with integrity, transparency and conflicts of interest. However, she did not agree that the outcome of the review should lighten the responsibility of developers to pay for their offsets.

"We have to learn to live with that and sometimes developer's profits - depending on the area that they chose [to develop in] - won't be as high," she said.