The plans, by the Stevenage West Consortium, which includes landowners and housebuilder Taylor Wimpey, were originally submitted to North Hertfordshire District Council and Stevenage Borough Council in 2001.
The plans were called in by the then secretary of state John Prescott in 2002 and a public inquiry was held in 2004. In 2005 Prescott said he was minded to approve the application, subject to an agreement regarding the provision of schools and other key infrastructure.
Subsequently, in 2009, the plans were approved by the new secretary of state, John Denham.
However, the proposals were opposed by North Hertfordshire District Council and Hertfordshire County Council, who submitted a joint legal challenge against the approval. Approximately 1,700 of the new homes proposed under the plans would have been built in North Hertfordshire.
In June 2011, a judge quashed the planning permission, agreeing with the councils that the secretary of state had failed to impose conditions that would deliver requirements for low carbon energy and that the permission also failed to secure the provision of temporary school accommodation that the secretary of state intended, and in fact enabled the developer to "avoid all responsibility for the provision of schools".
The application was sent to communities secretary Eric Pickles who had decided to re-open the inquiry.
However, it has emerged today that Taylor Wimpey has now withdrawn the proposals.
Stevenage Borough Council has expressed disappointed but said it understood Taylor Wimpey’s decision. John Gardner, executive member for planning and regeneration, said: "At a time when the country - and Stevenage - desperately needs more homes, the withdrawal of the applications for 3,600 homes and associated development to the west of Stevenage is a serious disappointment.
"We had hoped that this development might have received more support from both central government and some fellow local authorities in order to deliver this important scheme. The task now is for us all in Hertfordshire to work together to meet the current and future housing and employment needs of our people. The right to decent housing is a fundamental requirement of a civilised society."
Stevenage Borough Council added that it is currently discussing a smaller-scale scheme with Taylor Wimpey, "solely within the Stevenage borough boundary".
But Richard Thake, cabinet member for planning at Hertfordshire County Council, said: "We welcome the news that these planning applications have been withdrawn. Hertfordshire County Council is not against development, but it must be the right kind of development with the right infrastructure underpinning it. We did not feel that the west of Stevenage development proposals met those requirements."
A Taylor Wimpey spokesman said: "As 12 years have elapsed since we made the application, it is no longer deliverable or viable in its current form and is not worth pursuing any further. The combined costs of infrastructure required to serve the site, together with the contributions sought through the Section 106 planning obligations are such that the resulting values associated with the scheme are, at best, only nominal and therefore do not produce adequate returns to both land owners and developers".
The decision is a fresh setback for Stevenage Council’s plans to build a series of urban extensions around the town. In 2010, North Hertfordshire District Council suspended work on a joint project to deliver 9,600 homes on land to the north of the town.
And in June 2011, a planning inspector found Stevenage Council's draft core strategy unsound because the housing targets it contained depended upon housing growth that North Hertfordshire District Council no longer intended to deliver.