The plans by Newett Homes would see 65 properties being built on land to the north-east of Trefoil Close in Guisborough.
The West Yorkshire-based company has begun a public consultation prior to the submission of a formal planning application to Redcar and Cleveland Council.
It said the new properties would be “modelled to fit sympathetically” with surrounding homes and a public open space would be delivered for the local community to use.
Residents have described the development as being unnecessary and on an ancient meadow and environmentally sensitive site, which is home to the likes of otter, egrets, grey heron, barn owl and water voles.
They held a meeting on November 19 to discuss their concerns and next steps.
It is also feared a massive traffic increase will result from the planned development impacting The Avenue, which runs through the existing Hutton Meadows estate, and which could endanger children walking to a nearby primary school.
Other concerns include the potential negative impact on parking and available school places, along with increased flooding risks.
Conrad Ellison, chairman of Guisborough Against More Building on Open Land, said: “If we don’t express our concerns, Guisborough will become one large housing estate with no natural green areas for wildlife.
“Guisborough is a countryside town and we want it to remain that way. The infrastructure of the town is already struggling to cope with the hundreds of new houses that have been built recently.”
Newett Homes states the proposed housing would be a mixture of two, three and four bedroomed properties in a highly sustainable location with close proximity to bus, cycle and road links.
A new site access road would be built off Trefoil Close and the public open space accessed from a path on Maynell Avenue. Newett Homes director Will Newett said the project would deliver “much needed” new homes in Guisborough.
He said: “We are keen to get the views of local residents to help inform the plans so we’d encourage as many people to have their say as possible.”
A spokesman for Newett Homes said the site was not within local green belt and was unallocated in the council’s Local Plan, a blueprint for future development.
He said ecology work carried out on the site to date showed it had “little interest” for protected species, but this was ongoing and would be discussed and agreed with the council and Natural England.
Pre-application discussions had also been conducted with the council and there were “no issues of principle with developing this site”.
The spokesman said the proposed development would lead to a “very modest” rise in additional traffic and a transport assessment and travel plan had been prepared for the planning authority.
He said: “The technical advice we have received is that this limited additional traffic should not have a major effect on highway safety. Parking is an existing issue and the development won’t lead to extra parking on the existing streets as sufficient parking will be provided on the site to ensure this isn’t made any worse.”
The company said it anticipated that some level of funding may need to be provided to the council with a contribution being made to enhance school capacity should it be deemed necessary.
It also said the housing would not add to any local flooding issues with a drainage system being designed to modern standards with an element of additional capacity to cope with future climate change effects.
Residents can leave comments on the plans by visiting the website https://newetthomes-guisborough.co.uk/
Redcar and Cleveland Council said it would consider any planning application in the usual way once received and also conduct its own consultation as part of the process.