Shellharbour City councillors have approved a planning proposal that would allow a residential building to be built in the business zone with consent.

The infamous Queen Street petrol station has sat empty for more than a decade.

Shellharbour Mayor Marianne Saliba said in the four years she had been on the council there was no greater issue raised with her by the community than the dilapidated petrol station site.

"It has been a pain to the neighbouring childcare centre, a nightmare for shops alongside it and to the community . . . I am so glad to see there is an alternative for it," Cr Saliba said.

Cr Kellie Marsh said the property had been "a drain on the psyche of the people of Shellharbour for some time".

Cr Marsh said council figures showed the area the petrol station was located in suffered from "grass roots poverty", including the highest levels of unemployment and highest numbers of disengaged youth in Shellharbour City.

"The site has been embarrassing for locals, however during the consultation I have had over the years I have not had anyone say they wanted residential units there, rather things like a youth centre or after school hours care.

"I am however concerned if the proposal isn't accepted we could be going around in circles for a long time and it's best to have the site cleaned up and something there."

Deputy Mayor Paul Rankin expressed concern that if the developer was given approval to rezone and then sells the land for a higher price, rather than proceed with the project, then the council would have been "sucker punched".

However, Cr Saliba said the service station had been "an absolute festering sore on Warilla for a long, long time" and rezoning was "a fairly expensive process".

"If someone wants to put in a planning proposal then that is their right . . . it is called speculation and people are entitled to do that, however it doesn't change the use of the site," Cr Saliba said.