A scheme to build up to 500 homes and a visitor lodge on the higher land behind Omaha Beach has been rejected by the Environment Court.

The decision was greeted with relief yesterday by Omaha Beach Community president Graham Painter.

"We are pretty chuffed - it's a clear win."

He refused to say how much Prime Minister John Key, who is one of the Rodney resort's 1300 holiday home owners, chipped in for the court battle to stop buildings being constructed to nearly the top of a ridge.

Lawyer Richard Brabant said the community had to put in a lot of money because it first had to win a court case for the right to join the appeal. Developer Omaha Park had opposed this.

In a reserved decision, Judge Jeff Smith said the area south of the Omaha residential area was inappropriate for urban development.

The court disallowed the appeal of Omaha Park against the Rodney District Plan, which put an East Coast Rural Zone over the company's 650ha.

It confirmed the zone provision in the district plan, which was brought in to control pressure for residential development on the rural coast north of Orewa.

The zone aims to keep landscape, biological and other features of the area by rigorously controlling the number of new lots.

About 40-70 homes could be allowed under the zone, including the five homes already built in the area.

But Omaha Park proposed a special zone which would allow a medium- to high-density Seaview Village and more liberal zoning for cluster housing and rural lifestyle sites. It originally wanted up to 800 houses.

The court noted the scheme drew "broad and strong opposition" from the existing residents and from the Auckland Regional Council and Rodney District Council.

Omaha Park's lawyer, Andrew Green, called it an attempt to "pull up the ladder" within the existing development. He said not enough coastal land was provided for in the district plan and this would lead to suppressed demand and perhaps overpricing.

The Herald on Sunday reported this month that a waterfront bach fetched $2.65 million at auction.

The court said the company's comprehensive development package was a clear trade-off for urban development in exchange for community benefits such as an alternative access road and planting and preserving the rest of the wider property, including the 111ha Hubbard's Bush, which adjoins Tawharanui Regional Park.

However, the offer did not compensate for the loss of rural character, amenity and landscape.