Defence Housing's Lawson North proposal is now under environmental assessment, after environmental groups' appeal to have development deemed unacceptable was ignored by the Commonwealth.
An environmental impact statement will be assessed considering how residential development and associated infrastructure works at Belconnen Naval Station will effect threatened species.
ACT Environment Minister Rebecca Vassarotti has written to her federal counterpart outlining her "serious concerns" for the "unacceptable" impact on native plants and animals.
Ms Vassarotti urged Environment Minister Tanya Plibersek to consider the destruction of temperate grassland, as well as habitat for the golden sun moth and striped legless lizard in her assessment.
"Many of the impacts of this development will cause irreversible harm to endangered species," she said.
The proposal to build more than 440 dwellings for Defence families and the public has been met with fierce resistance from environment groups, who claim 15.8 hectares of critically-endangered grassland will be lost.
Helen Oakey, Conservation Council ACT Region Executive Director, said while it was disappointing the proposal had passed the Environment Protection and Biodiversity Conservation Act's first stage, the fight wasn't over.
Ms Oakey said Senator Katy Gallagher and Minister Matt Thistlethwaite had the power to direct Defence Housing Australis to withdraw and review the project.
"This new federal government has expressed strong concern about the 2021 State of the Environment Report, which showed most of Australia's environmental indicators are in decline, so it is disappointing and surprising that DHA has continued to proceed with this housing proposal which so clearly impacts on environmental values," she said.
Ms Oakey said Defence Housing Australia's entire business model lent itself to them acting as a property developer.
"Only around 150 medium density houses at Lawson will be retained for Defence personnel," she said.
"The bulk of the development footprint, including areas that result in the destruction of sensitive environmental areas, are to be sold for profit on the open market to cross subsidise defence housing."
The proposed development would more than double existing housing allowances for the area, from 22.5 to 47 hectares of land.
The project will require approval from the National Capital Authority for an amendment to the territory plan.
Ms Oakey said the NCA had already identified that environmentally-sensitive areas are zoned for conservation.
"This project is a classic case of death by a thousand cuts to our biodiversity," she said.
"If you are wondering why our biodiversity is in decline, then look no further."
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