Outline planning permission has been refused for the former auction mart site in Ripon.
Property developers Newby Management are seeking to build 75 homes on the vacant site.
The planning committee met on 11 February 2014 and listened to arguments for and against the application.
Concern was raised around ground stability and that the water course was gradually dissolving a layer of gypsum in the ground leading to subsidence.
The area has had incidence of subsidence and e some houses adjacent to this development had also received damage due to subsidence.
The applicant countered the arguments by saying that there was insufficient evidence that the ground is unstable and reminded the planning meeting that they were requesting outline planning approval at this stage.
It was acknowledged that the site is an eyesore and something needed to be done with it.
Harrogate Borough Council have said that it will now likely be reffered to a planning review as their own policies have been met.