The applicants, Gleeson Developments, Miller Homes and Welbeck Land, appealed against the decision by Eastleigh Borough Council to refuse their application.
The proposal, on the edge of the village of Boorley Green near Southampton, involves up to 680 homes, of which 35 per cent would be affordable, retail and community facilities, a primary school and open space.
The 45-hectare site is on farming land in a designated "local gap" in the local plan, which aims to restrict development on countryside between settlements, according to the appeal report by planning inspector David Nicholson.
The appeal was recovered by communities secretary Sajid Javid because it involved plans for more than 150 homes.
A letter sent on behalf of Javid says the council’s development plan "consists of the saved policies of the Eastleigh Borough Local Plan Review 2001-2011, adopted in 2006".
A new emerging draft local plan, the Eastleigh Borough Local Plan 2011-2036, is "only at the issues and options stage and no policies have yet been published". The council only has a housing land supply of about four years, according to the letter.
The communities secretary believed the appeal proposal would conflict with the saved local plan policies, it goes on to say.
But because "the development plan policies for the supply of housing are out-of-date and the council cannot demonstrate a five year housing land supply", the National Planning Policy Framework’s presumption in favour of sustainable development is "engaged", the letter says.
The minister "gives considerable weight to the benefits of the scheme in delivering a new neighbourhood comprising of a large number of homes". The proposal "would make a significant contribution in terms of helping to make up the deficit against the five year housing land supply and the need for affordable housing", it adds.
Though Javid "acknowledges that the development of this site would harm the landscape and result in the loss of countryside", this is given moderate weight because there would be "very limited impact on views from outside the site and its immediate surroundings".
The letter concludes that the "adverse impacts would not significantly and demonstrably outweigh the identified benefits when assessed against the policies in the framework taken as a whole".