Villagers were left disappointed after plans to build 12 homes in rural Preston were thrown out.
United Utilities applied to build the homes on land off Preston Road in Grimsargh, which could have secured the future of a wetland nature area.
If approved, the plans would have seen the site of three former reservoirs, known as Grimsargh Wetlands, being handed over to the parish council.
But Preston Council’s planning committee went against the advice of officers and threw out the plans, over fears of a lack of affordable housing.
Senior planning officer John Studholme said: “The applicants’ aim is to obtain planning permission, to dispose of the site and fund the improvement of the reservoirs.”
But councillors’ opinions were divided, with chairman Coun Brian Rollo having the casting vote.
He said: “I’ve got deep concerns about no affordable housing in the countryside.
“We have a specific policy for affordable housing in rural areas.
“Whereas in urban areas we ask for 30 per cent of affordable housing in developments over 15 houses, in rural areas we ask for 35 per cent in developments over five houses. It’s because what’s lacking in rural areas is affordable housing.”
Lindsay Philipson, chairman of Grimsargh Parish Council, said villagers were “totally crestfallen” after the decision.
She said: “We are very disappointed about the outcome of the application, which would have safeguarded the future of the wetlands area for the village.”