A huge residential project near Byron bay has been referred to the NSW corruption watchdog.

Greens' MP Jan Barham says decision on the housing proposal were not made by the Byron Bay Council, and the Independent Commission Against Corruption needs to find out why.

The plans for project to build over 1,000 houses at West Byron awaiting approval by the NSW Government's planning group.

But Ms Barham says the matter was taken out of the hands of the Byron Shire Council.

“I have provided them with what I believe are sufficient details and references for them to consider ... certainly I think I have provided enough information for (the ICAC) to query as I have done and many people in the community, as to why the council had the determination for these lands removed from them and given over to the State Government,” she told the ABC.

Ms Barham said the council had spent years deliberating and forming its decision, which was to knock back the concept.

She says the proposal is not suitable for consideration by the State Government under current guidelines.

“What I have proposed to the ICAC is that the determination by the previous government that it met the requirements of the major projects or major development SEPP [state environmental planning policies] were unfounded.

“The details of that have been outlined in terms of the history of assessment of the site for its potential urban residential development,” Ms Barham said.

But the state member for Ballina Don Page says the Byron Shire Council does not want planning power over the controversial residential development, and has chosen not to deal with the matter.

Mr Page told reporters that the Byron council exempted itself from the initial rezoning work, leading the Keneally Government to declare the West Byron site one of “state significance” and deal with the rezoning itself.