Plans to bulldoze Besford House in Trinity Street, Belle Vue, Shrewsbury, and replace it with 14 homes were refused by a six to two majority at a Shropshire Council planning meeting yesterday.
The site was sold by the council for about £1 million last year to Shrewsbury-based developer Saxonby, which has been working with Shropshire Housing Group on plans for the homes.
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The scheme would have seen 12 semi-detached and two detached houses built, along with parking for 26 vehicles.
But the plans were met with outrage by residents, with more than 70 written objections to the council citing fears over inadequate parking, overdevelopment, and damage to the conservation area. About 20 residents were at yesterday's Shirehall meeting.
Resident Chris Wilbraham said: "We do not want Besford House demolished and replaced with what can only be described as a drab and boring development of no architectural significance at all."
But developer Carl Huntley claimed the development would help relieve some of the demand for housing.
Councillor Miles Kenny said: "Any development has to be sympathetic to the area and removing it will not by sympathetic."