A controversial development application in Meroo Meadow was passed by Shoalhaven City Council's development committee at their August 6 meeting.
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Councillor Kaye Gartner said the approval was "a legacy issue".
"This is the only way out," she said.
"There's no good answer for the people who live along Emerald Drive, but ... we can't stop the owner from making use of their land."
The approval is for a 15-lot development at the end of Emerald Drive. Residents are concerned the street is too narrow to support extra traffic safely.
The developer estimates there will be about 120 extra car movements along the road per day as a result of the development.
Councillor John Wells, who voted against the motion, said Emerald Drive was only slightly larger than a laneway.
"The average daily traffic loading for laneways is 15 vehicles, but we have more than 500 on Emerald Drive per day at the moment," he said.
A representative of the developer, Matt Philpott, said they understood residents saw the development as"unfavourable".
"We knew traffic related matters would be an issue," he said.
"This is a significant compromise between what the residents would like, which is probably nothing, and what the developer would like, which is 37 lots."
Councillor Annette Alldrick and Cr Wells voted against the motion, with remaining councillors supporting it.