So far, though, the testing of NSW homes remains voluntary - relying on owners to request a check of their home to see whether they have the deadly loose-fill asbestos insulation.

Bungendore Fluffy owner Eddie Casey was among families celebrating at the Royal Hotel in Queanbeyan on Friday night, after the announcement from NSW Finance Minister Dominic Perrottet.

It was a huge relief for his family, he said. He hoped the scheme would encourage others who suspected loose-fill insulation to have their homes tested to resolve the issue once and for all.

"People who are scared or worried about the repercussions of having a Mr Fluffy house must realise there is now a wealth of support available, and owners will no longer be left emotionally, nor financially stranded," he said.

The NSW decision came after a parliamentary inquiry declared the homes uninhabitable and recommended NSW follow Canberra's lead.

Mr Perrottet said on Friday the only enduring solution was demolition. He set up a taskforce to report by the end of May on the most cost-effective option for a buyback and demolition, and on how the scheme would be implemented and managed.

In the meantime, NSW families will have access to $10,000, plus $2000 for each child, for short-term accommodation, $1000 to replace furniture and clothes, free assessments, cleaning and sealing to make the homes safe before they are demolished.

"From a short-term position, what we're doing is ensuring that those homes with people living in them are safe," Mr Perrottet said. "And then we're also announcing a taskforce which will look at long-term solutions, with the purpose being that we will be demolishing and purchasing this land from those affected families."

While little is known about the extent of loose-fill asbestos contamination of NSW homes, Queanbeyan is believed to be worst affected, with 52 homes discovered to date, 38 of them in one apartment block.

Queanbeyan owner Mike Bresnik, who re-mortgaged his home to raise $50,000 to have the asbestos removed a decade ago, said he would be thrilled at an option that allowed owners to return to their land and rebuild.

"We went through this 25 years ago and they didn't give a stuff so I'm pleased to see they've finally decided they'll do something about it," he said.

Air testing some years ago detected no fibres in the living areas of his home, but Mr Bresnik was expecting to receive the results of new testing on Friday night, with a worry at the back of his mind about whether the ducted gas heating installed through the subfloor could have caused contamination.

"Until the proverbial hit the fan a few months back I've got to say I felt totally safe and hopefully I'll feel the same tomorrow. Hopefully tomorrow will be another happy day," Mr Bresnik said. He and his wife look after their granddaughter in the home one day a week.

Spokeswoman for the Fluffy Owners and Residents Action Group Brianna Heseltine put the NSW decision down to the solidarity of Canberra and Queanbeyan families, who had stood together, encouraging Queanbeyan owners to come forward.

"Just by realising they had a lot of people who were prepared to stand shoulder to shoulder with them, they all started to do it, and though that courage and that determination to stand up in Queanbeyan, we've seen the result. This is a real victory for people power from both sides of the border," she said. "I've sat down with those people in Queanbeyan and seen how crushed they are. They didn't believe they'd get a result but now they have."

Ms Heseltine has urged the NSW government to do a compulsory survey of pre-1980s homes in Queanbeyan, the "epicentre of the Fluffy disaster in NSW".

Queanbeyan's Fluffy problem results from its proximity to Canberra, where Mr Fluffy Dirk Jansen based his business, pumping the insulation into roof cavities. The NSW government said a second company, Sydney-based Bowers Ashphalt, had also installed loose-fill asbestos insulation, but only for large non-residential buildings - news that points to contamination of workplaces in Sydney.

Asked about the likelihood of a NSW scheme that allowed owners to rebuild on their land, ACT Chief Minister Andrew Barr said, "We're not aware of whether the NSW Government has reached that level of detail – they have only just set up a taskforce to develop the program and begun offering assistance - and it's not our place to speculate on the finer details."

He remained satisfied that the ACT's program was fair and responsible, he said. It was at the outer edge of affordability, but gave homeowners "a chance to move on from this ordeal".