A controversial proposal to build an over-55s lifestyle village at Scotts Head on the NSW Mid North Coast has been withdrawn.   

The proposal by property group Ingenia Communities was to build 255 dwellings in the small community in the Nambucca Valley.

The group informed Nambucca Valley Council on Wednesday of the withdrawal of its proposal.

In a statement, Ingenia Communities CEO Simon Owen said the decision had been made following extensive community engagement and feedback.

"While we continue to believe there is demand for a quality lifestyle community in the area, we respect the views of the community and have carefully considered the issues raised," he said.

"We would also like to thank the local community for the honesty and passion of their input to the consultation process, including those locals who support the project."

Spokesman for community group Save Scotts Head, Ray Fowke, said the outcome was a positive one for the idyllic beachside town.

"People come to Scotts and we welcome them with open arms because it's a peaceful, relaxed and not overcrowded place," he said.

Council's recent advice regarding the limitations of local infrastructure in the area was also a key factor in Ingenia Communities decision to withdraw the proposal.

Mr Fowke said the development would have added an unsustainable amount of pressure to key infrastructure.

Supporters of the project and Ingenia had argued the village would have provided more affordable homes in a region grappling with a crippling housing shortage.

"Throughout the assessment process, the opportunity was measured against the group's focus on creating an affordable, vibrant and sustainable lifestyle estate," Mr Owen said.

But Mr Fowke said this proposal was not the answer.

"This was limited to over-55s and really meant no opportunities for young families."

Greens MLC Cate Faehrmann said it was a win for the community.

"It shows that communities can win against inappropriate developments," she said. 

"It was an absurd proposal from the beginning — cramming a new population of hundreds of elderly residents into the area was never going to work," Ms Faehrmann said.

"Scotts Head already has a shortage of medical services, and with only one access road to get out in the inevitable case of fires and floods, it was a dangerously bad idea.

"Not to mention clearing precious habitat for our wildlife."

Ms Faehrmann said this was one of many inappropriate developments in NSW's small coastal towns.

Mr Fowke said Scotts Head was in support of expanding its population and amenities, but in a more sustainable way.

"We welcome more people and families on those areas where it's suitable, where it's serviced and [where] the local services can cope."