Miniature donkeys on Willow Creek Farm in Southbury, Conn., with farm co-owner Jill Sloane. Half the property is being preserved and the rest is to be divided into building lots. Peter Foley for The Wall Street Journal

SOUTHBURY, Conn.—The old Westenhook Farm raised hundreds of prized English quarter horses on a hillside here in a time when the town was a rural place of dairy farms, summer houses and estates.

Now much of the farm is being restored and protected. Southbury, like many once rural areas across the region, is moving to preserve its remaining open space and agricultural acreage in the face of rising land values and suburban development.

In a Solomon-like decision, the town agreed to allow a developer to cut the 103-acre Westenhook Farm in half: The developer would build 24 houses on the property on the condition he preserve about half the site that still has paddocks, stables and a barn. The first of the new homes now is under construction and on the market for $759,000.

DeLoris Curtis, the land use administrator in Southbury, said the town, working with local preservation groups, was closing in on a goal to preserve 20% of the land in Southbury.

"It contributes to the overall quality of life," she said of the plan for the farm. "It still gives you that rural sense."

The Southbury project is being developed by Raj K. Bhatia, a New York real-estate investor. He bought the horse farm with partners for $1.3 million in 2000 from a member of the family that had long owned it. He and the other new owners planned to clear the site and divide it up into building lots.

But Mr. Bhatia, whose first wife grew up on a horse farm in Missouri, said he thought the farm could be revived. He bought out his partners, restored the stables and added new indoor and outdoor training spaces.

"I had a partner who just wanted to build homes," Mr. Bhatia said. "You could see that with a little bit of care and love and investment this could be an interesting centerpiece to a more creative community, whether you like horses or not."

Ed Edelson, the first selectman in Southbury, said that across the U.S. many developers had put houses around golf courses, but Mr. Bhatia had a different notion. "Instead of golf courses they said they were going to make equestrian trails for people who like to ride," he said.

The first home has five bedrooms and 3,500 square feet. It has wood cedar siding and an equine-theme weather vane at the top. Details, including permissible paint colors, are spelled out in town planning documents. No vinyl siding is allowed.

A horse grazes at Willow Creek Farm in Southbury, Conn. Peter Foley for The Wall Street Journal

The urge to preserve farmland extends across the region. A state farmland preservation program in New Jersey has provided money to set aside 209,000 acres, but has allocated all its funds. Voters will be asked in November to approve a ballot measure to raise more funds for the programs.

On the East End of Long Island, some preservationists are working to promote farming, not just open space. On Tuesday, the nonprofit Peconic Land Trust working with the Town of Southampton offered 33 acres of protected land for sale to farmers—but with a deed restriction requiring that they be actively farmed. The trust paid $12 million for the land last month and sold the rights to develop the property to the town for $11.2 million.

In Southbury, 80 miles from Times Square, the population is 20,000, nearly four times what it was before I-84 came through the area in the mid-1960s. Heritage Village, a condo development created in the 1960s and 1970s, brought in 6,000 people. International Business Machines Corp. developed a campus there.

The Westenhook Farm, later known as the Riker's Farm, was owned by John J. Riker and his wife, Marguerite Norris, the daughter of James E. Norris, a businessman and investor in many professional sports teams, including the New York Rangers and the Chicago Blackhawks.

Ms. Norris was the first woman to serve as chief executive for a National Hockey League team, heading the Detroit Red Wings after her father's death in 1952. The team won the Stanley Cup in two of the three seasons she was there.

Jim McAllister, a 63-year-old owner of the Rolling M Ranch in Southbury, said when he was a boy, the town had a country feel, with a grocery, feed store and drugstore. Mr. McAllister raises quarter horses and supports the town's preservation efforts. "We rode our horses like kids ride bicycles today," he said. "We rode them everywhere."

Mr. McAllister worked at the Westenhook farm when he was in high school. At the time, the Rikers raised English-style quarter horses, hunters and jumpers. He said the farm was stitched end-to-end with paddocks of white board fencing.

In 2009, Mr. Bhatia lost control of the project through foreclosure. But a friend, Jill Sloane, a real-estate broker who had represented Mr. Bhatia for many years in Manhattan, stepped in to help. In 2011, she bought the mortgage back from the bank, along with two other investors. Ms. Sloane and Mr. Bhatia were married last year.

The horse farm and development are now known as Willow Creek Farm and Willow Creek Estates. Its homes will overlook a scene of horse paddocks, rings, a pond and wetlands and another wooded hillside beyond.

Willow Creek has stables for about 60 horses, half rented to local owners who care for their horses themselves, and the others with full boarding and stalls Ms. Sloane also keeps miniature donkeys on the property.

Willow Creek has an indoor arena for winter training and two outdoor rings, one for jumping and one for the sport involving highly precise riding and horse control known as dressage.

A rendering of first house under construction at Willow Creek Estate, overlooking the horse farm. Merrell Architects

Write to Josh Barbanel at