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The Peninsula Holdings Trust came to the first day of a resource consent hearing on Tuesday with a proposal to cut the number of proposed subdivision lots in the area from eight to four.
Landowner Steven Clearwater said he had recently signed a conditional sale agreement for some of the land involved with a nearby farmer.
The trust originally applied to the DCC to subdivide rural zoned land at 78 Cape Saunders Rd, with a capital value of almost $1.9million.
The initial plan was to create 10 new sites of between 2ha and 194ha on the land between Hoopers Inlet and Papanui Inlet, and on the northern slopes of Mt Charles.
In an earlier report, Ms Darby had recommended the initial proposal be declined.
Commenting further yesterday, on the third day of the hearing, she said the revised proposal would create ''four undersized lots, with new residential activity''.
It was the undersized nature of the proposed lots that was ''non-complying''.
But in this case there was no ''overall breach'' of required density occurring, and the applicant could sell his existing titles separately without undertaking a subdivision.
Overall, she considered that the effects of the proposal would be moderate in the short to medium term, ''reducing to minor, subject to conditions being imposed on house positions and and treatment''.
The revised proposal remained ''generally inconsistent'' with the objectives and policies of both the district and the proposed plans.
The application was ''finely balanced'', the applicant having raised some ''sound arguments'' in justifying the proposed number of houses, and granting consent would result in the benefit of covenanted wetland areas.
The council could also exercise controls over the development on several matters, including a no-build covenant over the greater portion, and higher sections, of the property.
Her view was still that consent be declined, but she realised the applicant had options for selling and developing his land.
''It may be better for the council to grant consent and manage it through the inclusion of appropriate conditions,'' she said.
Before the hearing ended, hearing commissioner Colin Weatherall said he would receive more legal submissions before reaching his decision.
Appearing for the trust, lawyer Phil Page said that parts of the proposed areas for subdivision fell below the 15ha minimum in the operative plan and a larger area in the new 2GP, but denying consent could mean ''perverse'' outcomes for the environment.
Mr Page said the land lots that were subject to the hearing could have been reorganised to allow them to meet the official size requirements, including the 15ha limit.
But the applicant had not sought to do this because landscape architect Mike Moore, who gave evidence for the applicant, had advised that this changed approach would actually mean an ''inferior outcome'' for the environment.
The present carefully tailored application, with proposed covenant areas, would actually be less open to further housing development and better for the environment than an approach that fully met the property lot size requirements, Mr Page said.
In an earlier submission, Save the Otago Peninsula spokeswoman Lala Frazer said the proposed development compromised ''the integrity of the district plan'' and would create an ''undesirable and dangerous precedent'' in an outstanding landscape area.