Contentious plans to add several hundred more homes to the Shell Cove development have won conditional support from the state's Independent Planning Commission.
Shell Cove is a joint development between Shellharbour City Council and Frasers Property Australia.
Frasers sought to modify the concept plan for the Shell Cove development to boost home numbers from 1238 to 1566, as well as increase building heights in the harbour precinct on Boollwarroo Parade, Shellharbour.
The concept plan modification proposal was placed on exhibition in September 2017.
On Monday, the Commission approved, subject to conditions, the proposed changes to the concept plan.
More than 200 residents had lodged objections over a proposal to significantly increase building heights and the number of apartments.
Residents had expressed concerns that the increased building heights would take the hotel - which will also be moved to a new site at the northern edge of the harbour - from nine-storeys to 11-storeys high, and bump up many of the apartment buildings from four to six storeys.
Residents were also concerned about the amount of traffic the extra residents would generate and the change in "character" due to congestion and changes to views.
The Department of Planning & Environment referred the matter to the Commission for determination.
The Commission noted that "the large area covered by the concept plan is well suited to support the proposed increase in residential density with the needs of future residents to be met by a town centre precinct providing retail and community services."
"The modification application is in the public interest as it is consistent with the objectives of the (Illawarra-Shoalhaven) Regional Plan in providing additional housing supply and diversity in housing options close to services and jobs, and it will contribute to the diversification of the economy and provide additional employment opportunities," the Commission said.
"The proposed changes to the built form and character are acceptable... as they would not lead to significantly greater view loss or additional overshadowing than what was previously approved as part of the concept plan."
The Commission also found that the predicted two per cent increase in vehicular traffic generated by the expanded development will not significantly impact the state road network nor be noticeable in the context of total local traffic movements.
It also found that the demand for car parking generated by the expanded development would be able to be accommodated; and water and wastewater infrastructure capacity constraints can be appropriately managed through a condition of consent limiting the total number of dwellings until adequate servicing arrangements are in place.
Shellharbour Mayor Marianne Saliba was pleased the conditional approval had been given after a "vigourous and lengthy process".
"We should take confidence from the fact that the community's views have been considered in this process," she said.
"As a council, while we're creating a new suburb and needing to ensure it has all that it needs there, we have an obligation to the rest of our community to be financially sustainable, and that's part of this project.
"From our perspective, it's great that we have a community that will be sustainable, and it's also good that for our broader community, our long-term financial sustainability is secured through this as well.
"Things like money that can be spent in other parts of our city that haven't had any investment for long periods of time, this provides those opportunities for us."
In a statement, Frasers said they were "pleased the modification has now been resolved, and look forward to working toward project completion in accordance with the conditions now in place".