His decision will allow 102 houses to be developed in clusters - allowing better protection from hazards such as fires and tsunami.
Judge Smith said the 1 to 40 transferable development rights rule limited the potential impact on the values of the sand barrier.
"Whilst we recognise that smaller land owners have less ability to develop their property, this is in accordance with the balance of the Western Bay of Plenty District Plan," he said.
TKC Holdings and Carrus sought more liberal development rights while Blakely Pacific reduced its appeal to seeking protections for the continuation of production forestry.
Carrus complained that the 1 to 40 intensity rule was unfair because its 150ha meant it could only develop three houses without purchasing transferable development rights.
"It may still require non-complying consent as it was a cluster of less than 10 houses," Judge Smith said.
He concluded there was no justification to incentivise small developers to develop their land over larger landowners.
Judge Smith said the evidence was overwhelming that subdivision should not be permitted in special ecological areas.
An indicative development plan of March 13 showed TKC Holdings was proposing to build in the Significant Ecological Feature. He said a great deal of evidence was that linear development was more desirable than cluster development, and better outcomes could be achieved by allowing development along the coast.
However, Judge Smith concluded that there were issues of houses being visible from Bowentown and the Mount, together with impacts on the coastal environment.
"There is a clear basis for the council's decision to prefer clustering."
Ecological areas barred from development on Matakana Island:
Freshwater wetlands
Dune lakes
Frontline dune system
