Stages two and three of the 68-hectare Huntingfield development encroach within 100 metres of habitat patches for a small colony near Coffee Creek in the Peter Murrell Conservation Area.

It is one of the last known colonies of forty-spotted pardalotes on mainland Tasmania, and has declined significantly to be fewer than 10 birds in surveys of the site since 2010. The bird is now almost solely confined to Bruny and Maria islands.

A report to the government by environmental consultant NorthBarker detailed how the southern portion of the housing development could cause an increase in aggressive and predatory birds, human disturbance, feral cats and noise from traffic and housing.

The report resulted in the matter being referred to the Commonwealth under the Environment Protection and Biodiversity Conservation Act in mid-March.

To mitigate potential impacts on the bird colony, Communities Tasmania has proposed to establish a 100-metre buffer with the habitat, avoid access routes between the housing development and the Coffee Creek area and to close off existing walking paths to the area.

Other proposals include rehabilitating the feeder creek to Coffee Creek, improving native vegetation in the south of the housing development and giving future residents information about how to protect the habitat.

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The forty-spotted pardalote relies solely on white gums as habitat, found in three patches to the south of the Huntingfield development site.

The NorthBarker report notes that the colony "is at risk of imminent extinction".

The Huntingfield development includes 468 lots ranging from low density of greater than 500-square metres, to more than 150 townhouse lots. The land release was considered critical to the state government's attempt to quickly add more affordable housing for the state's south.

BirdLife Tasmania convenor Eric Woehler said the continued decline of the forty-spotted pardalote on mainland Tasmania meant every effort should be undertaken to ensure the survival of remaining colonies.

"The extinction of this colony isn't necessarily a given. It would be a sad outcome but at the same time it's not a foregone conclusion," he said.

"As the population becomes smaller and smaller, one event - like a fire, for example - can knock it out overnight.

"You don't want to have all your birds in one basket - like relying upon just a few colonies - because then it becomes a serious risk and a management issue.

"There's obviously a chance for increase risk of predation and disturbance, but also the potential for increased management."

BirdLife made a submission to the government in June in relation to the proposed development alongside the Peter Murrell Reserve.