South Kesteven District Council’s Grantham Area Action Plan (GAAP) designates the town as the district’s growth point and outlines proposals to build at least 5,529 homes up to 2026.
The plan's withdrawal was recommended by inspector Roland Punshon who criticised the "inconsistency" of the authority’s site selection.
He also said the plan boundary "appears to have been drawn tightly around the existing built-up area and the major allocated development sites", while the plan "contains no policy basis" for the council’s approach.
Punshon concluded: "I have a number of substantial concerns about the soundness of the GAAP.
"In my view the [document] is seeking to deal with an extremely complicated situation but is too simplistic and fails to deal properly and comprehensively with circumstances which are likely to arise.
"As it stands I fear that within a very short period the [document] will be found to be unfit for purpose."
Punshon said the council’s proposed modifications to the document were insufficient to address the concerns he raised and said the "most appropriate course of action" would be for the council to withdraw the plan, make the necessary changes and re-submit it.
Objections to the plan included representations from planning consultancy Barton Willmore, acting on behalf of a landowner who owns former allotments in the plan area which were not included as allocated development sites.
The inspector said the council’s decision to exclude the allotments was "flawed and likely to be an opportunity missed".
Dan Mitchell, partner in Barton Willmore’s Manchester office, said: "Grantham is going to undergo major growth over the next decade and a half and it is vital this expansion is properly planned with a consistent approach that encourages links to established cycle, walking and bus routes.
"We are pleased for our client that the inspector agreed with our evidence."
The council’s head of development and growth, Mark Williets said: "The key points of our growth plans are being supported but the inspector is now asking us to either identify additional sites – or a mechanism to bring reserve sites forward – if our preferred locations, which secure growth and associated infrastructure, stall."
Williets said Punshon’s request for changes to the plan before it is republished for consultation was not unusual and the inspector’s requests could "could be dealt with reasonably quickly".
He added: "Because of this the work will remain on target and we are still confident of progressing the development of the town as planned over the next few years."
In March, communities secretary Eric Pickles upheld the council’s rejection of plans for a 1,000-home greenfield development at Grantham in Lincolnshire, citing concerns that the approval would prejudice work on the area action plan.
Details on the area action plan can be found here.
NOTE: this article was updated on Thursday, November 15, at 1pm to add a comment from South Kesteven District Council.