The plans were refused by Teignbridge District Council in November last year for reasons including that the site had not been allocated for development in local policy and that it was outside the defined Dawlish settlement boundary.
SoS Eric Pickles said in his decision letter (68-page / 425KB PDF) that he agreed with a Planning Inspector's conclusions that the scheme would conflict with local policy aimed at restricting residential development on land outside any defined settlement limit and within an Area of Great Landscape Value.
However, he also agreed with the Inspector that, because the Council could not demonstrate a five year housing land supply as required by the National Planning Policy Framework, the relevant local policy should be considered out of date and planning permission should be granted unless "adverse impacts would significantly and demonstrably outweigh the benefits" of the scheme.
Pickles said that, although the development site was located outside the Dawlish settlement limit and the loss of rural landscape to urban development would harmfully alter the character and appearance of the area, it would not cause any "far-reaching adverse change" to the surrounding countryside.
"The appeal scheme represents sustainable development which would make a significant contribution towards addressing the undersupply of housing, including affordable housing, in the District," Pickles said.
He concluded that the "limited and localised" harm to the character and appearance of the countryside that the scheme would cause did not outweigh the benefits of the scheme.