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The backers of two special housing areas (SHAs) proposed for Queenstown's Ladies Mile say they are devastated they have been rejected.
Queenstown Lakes district councillors voted to decline the Glenpanel-Flint's Park and Laurel Hills proposals at Thursday's council meeting.
They were unanimous in turning down the contentious 156-home Laurel Hills SHA, while the vote on the two (423 units combined) proposed for the northern side of the arterial road was split - four in favour, six against.
The 600-home Coneburn development near Hanley's Farm was approved unanimously.
Flint's Park backer Lindsey Topp said the council had missed a good opportunity to provide much-needed affordable housing, and was not taking advantage of the Government's $24million Housing Infrastructure Fund (HIF) to build new infrastructure along the Ladies Mile.
The interest-free loan facility offered a "fair chunk of change" that could resolve the traffic congestion issues councillors were most concerned about.
"That work could be done before any new houses came on board."
He and fellow backer Mark Tylden had yet to discuss whether the formation of an urban development authority, expected to be set up by the Government, could encourage them to put their proposal forward again at a later date.
"It's just that when you spend so much time heading down the track - you're encouraged to do so and you do everything that's asked of you - and you end up with an outcome like this.
"We'll have to think about that."
Kristan Stalker, a director of the family company behind the Glenpanel proposal, said he was "perplexed" by the decision.
The council had made a significant investment in developing a Ladies Mile master plan, it had access to HIF loans to upgrade infrastructure and the Ministry of Education was interested in building a new primary school beside the proposed new housing.
Mr Stalker said he and his fellow directors had not decided on the next step, but would see what came of the Government's urban development authority.
One of Laurel Hills' backers, Fraser Mackenzie of David Reid Homes, said he was not surprised by the decision given councillors deferred the issue at last month's meeting.
He and his fellow backers were prepared to "wait and see" what happened.
"We're not too worried about it. It's a good location, and someday something might happen."
Housing and Urban Development Minister Phil Twyford told the Otago Daily Times last month SHAs did not make housing more affordable, and the legislation would not be extended beyond its September 16 expiry date.
Instead, the Government was setting up a housing and urban development authority to help speed up urban development projects.
Lake Hayes Estate and Shotover Country Community Association chairman Clark Pirie said councillors had been in a difficult spot with SHA legislation soon to expire, but had made the right decision.
Pressure on roading and educational facilities were causing residents "a lot of pain", and more houses would worsen the situation.
"I think it's right for them to take a step back and retain a significantly greater measure of control over development of the Ladies Mile."
Mayor Jim Boult told the developers at the meeting their proposals were "fair and reasonable", and he did not believe the council was opposed to development in the area in the future.
However, the NZ Transport Agency had "dropped the ball completely" in addressing the area's traffic issues.
The council could not approve further development along the Ladies Mile until the agency produced a "concrete plan" addressing the crossing of the Kawarau River by motorists, cyclists and pedestrians.