Mr Fewtrell said he had to pay $100,000 to remove soil from a Russell St property.
The cost meant it was no longer viable to develop as an affordable home and Mr Fewtrell now just planned to sell it.
Mr Fewtrell’s frustrations have been shared by a group of Dunedin businesses, led by Terramark planning manager Darryl Sycamore, who wrote to Infrastructure Minister Chris Bishop asking him to intervene.
Mr Fewtrell said testing on his Russell St site found "above acceptable" levels of lead, copper and zinc in the soil.
To remedy the site for development, the team had to "scrape" the site and then a further round of testing was required to ensure they had removed the contamination. The second round of testing came back clean, but the process delayed the project by six months, he said.
Consents were granted in March last year.
"I think they’re [the council] just so risk-averse.
"The biggest problem is that the council have got the power to say no and it’s unquestioned."
The process of removing the contaminants cost about $100,000, meaning the price of a house on the 340sq m site would have been "well above ‘affordable’ for most people".
"We would be looking at having to sell it for more than $800,000 once developed. That’s why we backed out.
"It’s a crazy state of affairs."
They were somewhat hamstrung by the fact there was only one main dump site and only one consultancy firm in Dunedin which dealt with those issues, Mr Fewtrell said.
"There seems to be a monopoly. I’ve got nothing against those people, they’re good at what they do, but it’s crazy we don’t have more options."
Council acting general manager customer and regulatory Paul Henderson said the council took a responsible approach in managing the risks to human health posed by contamination from lead-based paint.
"We don’t believe the approach is having a widespread impact on housing development in Dunedin.
"We continue to enable housing development in Dunedin in a range of ways, and much of the available land — rezoned greenfield residential sites and existing residential development sites — will not face the need to remediate their sites, in full or part."
The property had significant levels of contamination across the vacant section behind the existing residential home, Mr Henderson said.
"Sample concentrations of arsenic, benzopyrene, cadmium and lead in surface soils, along with average concentrations of lead in deeper soils, were also found to exceed guidelines for residential use."
This discovery, along with historical fill materials, meant the property was a moderate- to high-risk site and was classified as a Hazardous Activities and Industries List (Hail) site.
"The requirements are designed to protect human health and remain appropriate."
Mr Fewtrell said he would like the council’s leadership team to "show some common sense".
"With all these properties, people have lived in there for over 100 years, and people are still living in there, and no-one gives a damn about them growing veggies in the soil.
"It’s only when you subdivide it they [the council] care about it, which is just ridiculous, isn’t it?"
Otherwise, his mission to create more than 250 affordable homes was "progressing", Mr Fewtrell said.
There had been one home sold, two which had been matched and another which was going through the sales process.
He had secured land for more than 170 homes, of which more than 40 would be built next year.
