Napier City Council has backed down on the sale of a plot of land to Kāinga Ora after angry residents took legal action against the decision.
In a statement on Wednesday, the council said it was choosing to focus its stretched resources on the Cyclone Gabrielle recovery, rather than lengthy and pricey legal proceedings.
Around 200 residents were upset the council provisionally approved Kāinga Ora's plan to build 100 homes on Prebensen Drive consultation, and sought a judicial review in December.
Parklands Napier Residents and Ratepayers Association Incorporated spokesperson Craig Jones told RNZ at the time they believed councillors deliberately made the decision without their knowledge.
"They've just refused to negotiate, absolutely refused, they've done all this behind everyone's back."
Napier City Council on Wednesday said it decided to withdraw from the proposed sale at its 20 July meeting.
The sale arrangements between the parties had not yet concluded, and the legal challenge would have culminated in a hearing before the High Court later this year.
In a statement, the council said the decision was made against the backdrop of the "devastating damage and disruption" caused by Cyclone Gabrielle, which put significant pressure on its financial and staffing resources.
"Council has formed the view that it should prioritise the immediate social welfare and wellbeing of the Napier community, rather than continuing with litigation before the High Court.
"The council has a number of other key projects to progress that are demanding significant resource, and which will directly support the cyclone recovery."
The council said it would look into future options for the land when it had the capacity to do so.