Premier Mike Baird's announcement this week that his government would build a station at Barangaroo has left the question of whether a station would also be built at the University of Sydney or Waterloo as one of the main pending decisions about the planned new metro line through the city.

The decision is due this year and the university is arguing a station near or on campus would improve access for thousands of students, particularly from western Sydney.

But UrbanGrowth NSW, which has the job of trying to encourage projects along the rail corridor around the existing Central and Redfern stations, is trying to frame the decision as part of a broader redevelopment of the area to the south of Sydney's central business district.

"They're not apples with apples," said Troy Daly, program director for UrbanGrowth's Central to Eveleigh project.

"That's the difficulty in the assessment."

Former planning minister Brad Hazzard announced the idea of building over the rail lines around Central and Redfern two years ago, declaring the concept could deliver more than twice the total floor space as the mammoth Barangaroo development.

The concepts for the project are still being developed and according to Mr Daly UrbanGrowth now believes it would take 15 or 20 years for building over the rail lines to become financially viable.

But the agency is focusing on redeveloping areas adjacent to the rail lines as well as on nearby areas of government-owned land, such as the public housing estates at Waterloo.

This process would be super-charged if the new metro line, intended to link from Chatswood in the north to the Bankstown Line via Sydenham in the south, included a stop at Waterloo.

"From a social point of view it is a pretty profound catalyst to renew major social housing estates," Mr Daly told Fairfax Media.

He said public housing units dismantled by UrbanGrowth NSW would be replaced in equal numbers by the agency, which also wanted to increase the stock of other low- and middle-income dwellings.

"And importantly that level of transport service allows you to have a density outcome that allows the development from the site to pay for most of it," he said.

Mr Daly stressed UrbanGrowth was not looking at the Waterloo plans in isolation; it was also working on the development of the existing Redfern Station, to attract people and businesses to those areas closer to Sydney University and around Chippendale.

Geoff Turnbull, spokesperson for community group REDWatch, said he welcomed UrbanGrowth's recent commitment to replacing, new for old, any public housing dwellings slated for redevelopment.

"The cost for that will be quite a significant increase in density," said Mr Turnbull.

But he said UrbanGrowth had not shown how those higher densities would be offset by access to open space.

"If you end up with a whole pile of density and you don't end up with that sort of amenity, in the long term that comes back to impact upon the people who live there," he said.

Planning Minister Rob Stokes, who has responsibility for UrbanGrowth, would not be drawn on a preference for a train station at either Sydney University or Waterloo.

"Train stations create greater opportunities for housing than would exist otherwise, that's really all I can say," said Mr Stokes.