Planners have reversed their decision to approve proposals for 19 affordable homes - despite identifying a "clear need" for the scheme.
The application was originally given the go-ahead, subject to the completion of a legal agreement covering measures to safeguard wildlife and guaranteeing the development would be "100 per cent affordable".
But New Forest District Council has done a U-turn after confirming that the applicant, Reflect Homes, had failed to progress the Section 106 agreement - which sets out what conditions the developer would have to meet in return for getting planning permission.
A report to councillors said Reflect had "not engaged" with the authority.
It added: "Given the time that has elapsed since the original resolution was reached, it is considered little prospect that the applicant will now engage with the council in preparing the S.106. Based on this position, it is now recommended that the application be refused.
"The scheme proposes residential development in the open countryside.
"In order to be acceptable, the scheme is required to be 100 per cent affordable housing. The applicant has not ensured, through an appropriately worded legal agreement, that the scheme will be delivered and retained as affordable housing to meet local housing needs."
Reflect's application to build flats and houses at Gang Warily Farm in Newlands Road, Blackfield, was originally approved in August 2022.
A council report produced at the time cited the "clear need" for affordable homes in the area.
It added: "Irrespective of being outside the identified built-up areas its location does achieve environmental benefits of delivering housing in a location close to a wide variety of services, facilities, and infrastructure.
"It has social benefits of delivering a mix of housing types, sizes, and tenures as affordable housing, meeting identified housing need in the parish.
"Whilst the site is outside the defined built-up areas and therefore in the countryside, the character of the area is far from being rural.
"Residential properties are visible on higher ground to the south on Blackfield Road and the oil refinery dominates wider views throughout the area.
"The site would not be readily visible from the New Forest National Park, or in longer distance views to the extent of having an impact on its landscape and scenic beauty."
But the application sparked several letters of protest.
One of the objectors said the site was too small for the number of homes proposed. They added that water run-off would affect a nearby stream and the local water table, causing further flooding in the area.
"The environmental damage to the slow worms, bats, and newts that live in the area is also unacceptable."
Reflect Homes has been approached for comment.
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