Villagers in Menston, near Ilkley, had been pinning their hopes on defeating plans for 170 homes at Derry Hill on the land being given protected “village green” status.
They had to prove that the land in question had been used for at least 20 years for sports and past-times.
But an independent planning inspector ruled this week that the evidence for leisure use of the land suggested that it was only “occasional and sporadic”.
A public inquiry heard from witnesses who said they had used the site during the last two decades but others said it was limited because the land was being farmed.
Inspector David Manley, in an 80-page report, concluded that the village green application should be rejected.
A Bradford Council committee is expected to endorse his view at a meeting on Thursday.
Campaigners say they will fight on.
Alan Elsegood, chairman of Menston Community Association, said: “We are disappointed but undeterred.
“The inspector reports that he preferred the evidence of the landowners, despite the wealth of witness and photographic evidence from local people showing use of the fields for up to 40 years.
“His conclusion was that use of the land had not been sufficient in its regularity or intensity to justify adoption as village green.”
Mr Elsegood said a legal challenge could be mounted to halt the development and press to have the planning process re-started.
“We have used the delay to good effect to compile evidence for presentation to a judicial review and for the initiation of civil actions to prevent the inevitable nuisance from flooding which would result from construction on these fields, which contain springs, aquifers and watercourses, and from the surface water and sewage which would add to the present massively overloaded drainage system of Menston.
“Yorkshire Water, the Environment Agency and Bradford Council know all about this yet they have failed to take action, which leaves them open to judicial criticism and to having to restart the whole planning process, taking due account of these factors.”
Mr Elsegood said the evidence would be used to argue against the housing plans for both Derry Hill and Bingley Road.
Local independent councillor Chris Greaves said he was disappointed but not surprised by the decision as it was “always going to be a difficult case to prove”.
He said the local infrastructure, including road and rail, would not be able to cope with more residents. And flooding would be made worse.
He predicted more green field and green belt land across Yorkshire will be developed and has urged communities to do what they can to fight against it.
Coun Greaves said villagers facing unwanted development should collect evidence which backs their case, whether that be photographs of flooding or congestion on the roads.
Villagers in Menston hit out at the local authority for giving planning permission earlier this year to developer Barratt Homes to build at Derry Hill.
One local resident said: “Bradford Council has consistently ignored the views of the local community because it knows that Menston is one of the few places in the district where people are prepared to live and where builders want to build.
“But the village is split in two, with half of it over the border in Leeds – where there is already a huge new development under construction. How many new houses can one small village squeeze in?”
Councillors will discuss the inspector’s village green report this week.
Bradford Council’s strategic director for regeneration and culture, Barra Mac Ruairi, said: “We have now received the Planning Inspector’s recommendation on the application for land at Derry Hill to become a new village green.”
He confirmed the report would be considered by councillors on Thursday.