It's back to Plan A for a $1 billion housing and lakes recreation development at Hamilton's northern gateway after the proposal was knocked back as a Government special housing area.

Perry Group chief executive Richard Coventry said the project would now be pursued through the private plan change process the company started two years ago before it was encouraged to try to speed up a required zoning change by applying to provide an affordable housing area.

He hoped environment commissioners could hear the case before the end of the year.

Perry Group is proposing an 85 hectare development called Te Awa Lakes on a former quarry site currently zoned industrial.

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The plan would deliver 1500 new homes beside the Waikato River - 10 per cent of which would have been priced at around $520,000 to $650,000, classed as "affordable housing" under Government policy. By the Government's own analysis, Hamilton is short of 2500 homes, said Perry Group.

But last month associate housing minister Jenny Salesa sent the company back to the Hamilton City Council, saying the surrounding area was a strategic industrial node and new housing had the potential to constrain future industrial activities.

Dairy processors Fonterra and Open Country Dairy and meat company Affco have large operations in the Horotiu area and are among objectors to a zone change.

Coventry said the knockback left Perry Group with three options - to create an industrial park along the 1.5km of riverfront property, put the whole idea on hold, or continue with a potentially costly private plan change process.

Richard Coventry, chief executive of Waikato company Perry Group.
Richard Coventry, chief executive of Waikato company Perry Group.

He said the company had done a lot of work already on the development plan and it was hoped to leverage what he believed had been city council support for the special housing area (SHA) application.

"All this is conditional upon the further requirements of the commissioners. Our hope is that we can continue to utilise the necessary collaboration through the SHA, now fundamental to get the most time and cost-effective outcome for all parties involved.

"We understand the upcoming Urban Development Agreement could be a useful replacement to the SHA but there are still a few hurdles to get over first."

One thousand of the planned 1500 new homes would be within the city's northern boundary. The rest would be in Waikato District Council territory.

A concept design of how part of the Te Awa Lakes housing development could look, with residents kayaking their way around the neighbourhood. Photo / Facebook
A concept design of how part of the Te Awa Lakes housing development could look, with residents kayaking their way around the neighbourhood. Photo / Facebook

Coventry said Perry's was buoyed by the district council in its latest district plan change amendments supporting more residential to integrated industrial and commercial nodes, adjacent to the river, including at Horotiu.

"It is also positive that Te Awa Lakes is in the north Hamilton growth node for the Government's recent Hamilton to Auckland growth corridor initiative ... Te Awa Lakes could be the first of our mixed-use communities to leverage the new rail, expressway, river and cycleway (network).

"We are also infrastructure-ready so could have new houses ready in 2020."

Perry's was working on a cost analysis for a private plan change procedure.

Coventry has previously suggested it could cost up to $2m - and that was before the possibility the case would go to the Environment Court.