Developers had wanted to put the new homes on a site adjoining Rockpit Cottages in Rake Road. They argued that it would provide much- needed affordable accommodation.

But councillors refused planning permission because they felt the advantages of the scheme would not outweigh the harm it would cause to the appearance of the area.

Applicant company Molland Project Management said the proposed homes would have been subject to legal agreements to ensure they could only be bought and occupied by local people.

The affordability of the homes was questioned by Mike Owen, who spoke on behalf of nine objectors.

He said he had calculated that even if the homes were sold for 65 per cent of market value, as proposed, owners would still be faced with finding deposits of £32,500 and mortgage repayments of £900 a month.

"Are these costs considered to be acceptable for affordable housing?" he asked.

Mr Owen also said that granting planning permission would set a precedent for applications on other sites which would not normally be considered for residential development.

Liss Parish Council also objected to the application, and said it was not satisfied that the homes would remain affordable once the original occupants moved out.

Paul Beaumont, representing Molland Project Management, said: "I fully appreciate that this is a new approach for this district, but it is the result of many months of negotiations with council officers."

He said he believed the scheme would complement rather than spoil the terrace of Victorian cottages.

In a written report, EHDC planning officers pointed out that a similar scheme had been carried out successfully at Taunton and Deane in Somerset.

Their report concluded: "The development would assist in providing affordable housing in an area where there is a shortfall in provision."

The report recommended that planning approval should be granted, on condition that the applicants made payments towards providing an area of public open space and towards alternative transport measures to encourage occupants to reduce their car use.

But it failed to convince councillors on EHDC's south planning committee.

Cllr Judy Onslow said: "I do not think the affordable housing aspect will outweigh the harm which would be caused by this development."

The application was supported by Liss councillor Elizabeth Cartwright, who said it would help some local people to afford to live and work in East Hampshire.