Ann Mugford, who retired at the last local elections, said that an appeal decision by a government planning inspector to allow one of the three appeals over outline planning for Howberry in Courts Mount Road was "sad news".
Inspector Roger Clews was faced with three planning appeals for the site, all of which followed the demolition of an existing house at 20 Courts Mount Road.
He turned down two plans, one to provide four houses and another for 13, but granted outline planning permission for four two-bedroom homes, three three-bedroom houses and two detached houses on the site.
Blaming government planning policies, Mrs Mugford said: "Town cramming is good news for developers and bad for everybody else.
"I appreciate that people need new homes but will they be cheap?' she asked.
With no requirement for affordable homes on the site, Mrs Mugford said: "No they won't, and in that case it is self-defeating for a lovely town like Haslemere."
Bob Monteath, whose house overlooks Howberry, said how "bitterly disappointed he and the majority of residents were" following the public inquiry in June.
"The objection was unanimous in the road but it wasn't to be," said Mr Monteath.
The residents felt it was out of character but we are now waiting to see planning details of the scheme," he said.
"There are also worries over what this says about Haslemere. It could open the gates for any development and unless your home is listed. it there is no guarantee that developers can't build on any potential site.
Mr Monteath was concerned that "a family home could be torn down for no good reason".
Robert Serman, chairman of The Haslemere Society, which also vehemently opposed the development, expressed his disappointment.
"House owners having reasonable-sized gardens capable of development are being bombarded by developers and some will be tempted by the huge sums offered," said Mr Serman.
"The inspector appears simply to have followed new government rules on density. The powerful arguments that the planning committee found persuasive were set aside, as were the professional views of a highways expert," concluded Mr Serman.
The appeal decision brings to an end a huge but unsuccessful campaign against the owners of the property, Mr and Mrs L Day, who submitted the outline planning proposals.
A petition of 100 signatures was sent to Waverley Borough Council objecting to the initial application for 13 homes, as well as almost 50 letters of objection.