Developers Wrenbridge and Buccleuch Property proposed to demolish the former Argos building on Newborough and replace it with ground-floor retail units and, above, accommodation for 52 in-training NHS doctors and nurses from Scarborough Hospital and 150 university students.
In a heated meeting at Scarborough Spa last week, councillors voted to refuse planning permission by eight votes to seven on the grounds that the size of the building in the plans is too "overbearing" and an overall dislike of the proposed design and appearance.
Reacting to the decision, Cllr Liz Colling, Scarborough Borough Council cabinet member for inclusive growth, said: "While I respect the cross-party committee decision to refuse the application, the decision is disappointing and sets us back on our ambitions to regenerate the lower area of the town centre.
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"Plans to redevelop this eyesore site will now be put on hold while the applicant considers its options."
A motion to approve the former Argos plans from Cllr Paul Riley failed to gain a majority vote.
He said: "I was disappointed at last week’s decision as the development of the former Argos building was a key element in the Town Centre Strategy of developing a university town, creating a night-time economy and reviving a run-down part of town."
Cllr Riley said he believed the whole council had "conceded" the development would be of "substantial scale" when it was majority-approved in principle in July 2019.
He said he was not "entirely happy" with the design and scale of the plans but "considered that the benefits of the proposal outweighed the less attractive aspects".
"I still think that it would have made a great place for students to live and I have no concerns about their demand for limited parking which was a major concern of the aggressive campaign of lobbying against the scheme, involving the people in the public gallery," Cllr Riley said. "I feel that the likelihood now is that the site will be redeveloped for housing or holiday accommodation, and that will inevitably mean users demanding spaces to park their cars."
The plans had drawn widespread criticism over their location, appearance, parking and viability. Many of the scheme’s opponents have called for a large public square on the site instead.
Anthony Wilson, a former Group Planning Officer for Scarborough Council expressed his delight that councillors decided to refuse planning permission for the site.
He said: "I’m delighted, I have to say. I was very surprised, I didn’t expect that to be the outcome at all, but when I heard the news I really was quite pleased."
Mr Wilson, who served in the town’s planning department between 1988 and 2001 and subsequently worked as a planning inspector, added: "I was very disappointed in the scheme, it was completely inappropriate for the site.
"The amount of opposition that had been mobilised late on during the process almost certainly, I think, made a big difference."
A spokesperson for developers Wrenbridge and Buccleuch Property said: "Naturally we are disappointed that Members did not recognise the many benefits this planning application would bring to the town centre and we will now review all our options."
Scarborough Council was set to borrow £22m from the Public Works Loan Board to finance the scheme which officers had recommended for approval prior to the meeting. Developers will now have six months to appeal the planning committee’s decision.