Rotorua mayor Steve Chadwick says those around the council table have "let down" the community after a Special Housing Area application was rejected by central government.
At yesterday morning's full council meeting, the last before the upcoming election, the mayor said the Ngongotahā proposal had been "sabotaged by petty politics".
"All of us should feel outraged. We've let down our community ... In our vision, we said we would provide decent houses, houses that met people's needs. And this is one of the answers for meeting those."
Despite the outcome, the mayor said: "I think we did all the right steps council, and I will talk to the minister."
The Special Housing Areas Act expires next month.
This week, Minister of Housing and Urban Development Megan Woods wrote to the Rotorua Lakes Council to say its application had been declined.
Deputy mayor Dave Donaldson raised the "minister's letter of three days ago" as an urgent item in the meeting, and said it was "a real concern".
"The opportunity for up to 80 affordable houses for Ngongotahā has been lost," he said.
"We still have a critical shortage in Rotorua ... It would appear the Government is talking with two tongues on this issue."
The council's group operations manager, Henry Weston, explained that Special Housing Areas were "effectively a fast-track zoning process".
"The developer of the land came to us, we talked about the best way to go forward, and we talked through the option of using the Special Housing Area mechanism ... The council made a decision to push the application through to the ministry as a recommendation [to have 16ha of rural land in Ngongotahā rezoned residential]."
He said the site's flood hazards were reassessed by flooding and stormwater experts after the April 2018 floods.
Resource Management Act [RMA] Policy Committee chairwoman Karen Hunt said: "This is a classic case of nimbyism.
"This derails many good projects and we cannot continue to allow this to happen."
She said the council needed to go back to Minister Woods.
"I believe this decision was made, possibly, out of step."
Councillor Merepeka Raukawa-Tait said the outcome was disappointing but "we should have seen it coming".
"I think Special Housing Accords were flawed right from the start. They were put in at haste by the Government, to try to address the housing crisis."
She said the council needed to now look ahead, not "have a cry about it".
"We should be saying - for anything that comes on the table from a developer in the future - we will do everything we can to get the housing that is absolutely crucial for Rotorua ... We need other mechanisms."
How does the Special Housing Area process work?
- Application is lodged
- Application considered by RMA Policy Committee
- RMA Policy Committee makes a recommendation to full council
- Full council approves/doesn't approve the recommendation
- If a proposed area is approved to be referred to the minister for consideration or approval, it goes to the minister
- If a proposed area is not approved to be referred to the minister the process stops
- If a proposed area is approved by the minister, a consent is lodged
- Consultation happens if required
- Independent commissioners hear and decide whether to grant a consent