Applicants Persimmon and PMG had sought outline permission for 618 homes on an unallocated site at Gwern y Domen in Caerphilly, south Wales.
According to a planning report, the application attracted around 2,600 objections.
However, officers recommended approval, advising that the local authority is due to publish a housing land supply figure of just two years for 2019. "The magnitude of the shortfall is significant," they said.
Officers said just 122 homes were delivered in Caerphilly in the 2018/19 financial year. "This is the lowest rate of completions since records began when Caerphilly was formed in 1996," they said, adding that the figure was a fifth of the 575 homes required annually by the local development plan.
The shortfall is expected to persist for up to five years until the council adopts a new development plan, officers advised. "The only way to address it at present is to grant planning permissions," they said.
Officers noted that the proposed scheme would make a "significant contribution" to the authority’s housing shortfall and would provide 40 per cent affordable housing.
"Taking these matters together it is reasonable to attach significant weight to the need to increase housing land supply as a material planning consideration which would outweigh the normal policy objections to residential development on this site," they said.
Nevertheless, committee members voted against the recommendation for approval.
A statement from the council said: "Members opposed the recommendation at last night’s meeting and the matter was deferred to a future meeting of planning committee, where a further report will be presented with reasons for refusal. The meeting will likely take place in September."
In October 2017, housebuilder Redrow won an appeal against Caerphilly Council’s decision to refuse plans for 260 homes after Welsh ministers agreed with an inspector that the local development plan was "clearly not delivering the required number of dwellings".