Landowners want to rezone 561ha of farmland sandwiched between Lake Wakatipu and the Remarkables next to State Highway 6.
Hanley Downs, previously known as Henley Downs, is to the north of Jacks Point, a settlement built around a golf course, where houses sell for upwards of $700,000.
The Australian RCL Group, which owns some of the land, applied in 2013 to have the district plan changed.
Hanley Downs was covered by the Jacks Point Resort Zone and had approval for 1364 residences. But RCL and other landowners wanted permission for more - enabling higher density with houses priced at $500,000 and above.
The plan change, PC44, was put on hold until last year after objections.
Now, commissioners have recommended to the Queenstown Lakes District Council the majority of the plan change should be approved.
QLDC councillors will have the final say when the recommendation goes before them on Wednesday.
Commission chairman David Whitney, in his report, said: ‘‘The overall outcome, although enabling an increase in the total number of dwellings, will remain very comparable to the operative zone.
‘‘As such, PC44 will not give rise to problematic or inappropriate adverse effects beyond those already identified as suitable for this environment.''
Mr Whitney said evidence provided at the hearing in July 2015 showed much of the housing would be ‘‘largely hidden from view and will not occupy a prominent or sensitive part of the landscape''.
But the commissioners rejected plans on part of the land for an ‘‘education and innovation campus'', proposed by the majority landowners, known collectively as ‘‘Hanley Downs entities''.
The development had been an ‘‘evolving proposition'' but provided for possible commercial, entertainment, retail, visitor accommodation and other activities.
The commissioners also rejected parts of the plan change relating to building on The Tablelands and Peninsula Hill.
Jacks Point homeowners Alexander and Jayne Schrantz had objected strongly to that, although there was discussion over whether a covenant covering Jacks Point stopped residents objecting to future development.
The development will need road changes and flood defences - some 800m of floodbank, about 1.5m high, and reinforced by rock - after concerns were raised by the NZ Transport Agency and the Otago Regional Council.
RCL Group chief executive officer David Wightman, in his submissions to commissioners, said the goal was ‘‘to provide affordable, mid-range residential development for which there is a considerable shortage in the Wakatipu Basin''.
‘‘The subject land provides an opportunity which is not available elsewhere in the basin.''Mr Wightman was unavailable for comment yesterday.
The land was originally referred to as Henley Downs, but submissions to the hearing corrected it to Hanley Downs.
Mr Whitney said PC44 had changed considerably between its notification and the hearing.
‘‘PC44 is a far from textbook example of how a plan change should proceed through the statutory process.''
