The majority of councillors on a Wellington City Council committee have voted in favour of developing land at Shelly Bay.
They want to see the former military base site zoned as a 'special housing area' which would reduce obstacles for development.
Several councillors are strongly against the move, concerned the harbour-side area will be covered in houses and apartments.
However, Mayor Celia Wade-Brown said the decision should not be delayed any further, or Shelly Bay would be left to stagnate.
The nearly three hectares of land is owned by the developer Ian Cassels and the Port Nicholson Block Settlement Trust.