AE & J Shepherd had appealed Chichester District Council’s decision to refuse permission for the houses on land north of Aviary Close in Hambrook.
It was set to be decided by an inquiry but the developer withdrew the appeal on Thursday, March 30.
The application for 39 homes and open space received scores of official objections.
Chidham and Hambrook Parish Council ‘strongly objected’, giving 12 stated reasons including the fact it was outside its neighbourhood plan and the style of buildings were ‘out of character’ to others in the area.
In refusing the application in May 2016, the district council said it was outside the Settlement Boundary, did not have enough affordable housing and would increase disturbance on Chichester and Langstone Harbour Special Protection Area.