LYNNWOOD — Builders fear more lawsuits and red tape after the Snohomish County Council rejected a seemingly routine housing project this week.

The council killed a proposal to allow seven condominium-style homes on two-thirds of an acre in Lynnwood. It was an unexpected 3-2 vote that could prove a landmark shift in policy for a growing county.

This kind of proposal — lots of homes on small properties but sold as condominiums — had become commonplace and popular with builders in recent years in a county expecting the population to grow to more than 900,000 people in the next two decades.

After the council’s vote, more scrutiny is expected to make sure proposals are compatible with surrounding neighborhoods. County rules already require it, a prosecuting attorney recently told the council.

“We weren’t doing that,” said County Councilman Dave Somers, a Democrat, who voted in the majority to halt the seven-home project. “We were just rubber-stamping them. Now we’re going to take a look at them.”

Several say the move signals an abrupt change in how Snohomish County will consider future development proposals. The shift could affect how county officials review some of the dozens of land-use proposals filed each month in the county.

Builders say the change will lead to more hassle and higher costs each time they file requests to rezone properties for more houses or condos in urban areas.

The council vote changes expectations for property owners and builders and the issue is likely headed to court, said Mike Pattison of the Master Builders of King and Snohomish counties. It’s not fair to property owners to have their rights sidelined by politics, he said.

“In the short-run, we’re going to fight these in Superior Court,” Pattison said. “It is absolutely wrong and poor treatment of a property owner to set forward rules and expect them to play by them and pull the rug out from under them.”

In the long-term, “it may alter development patterns, and may undermine the comprehensive plan,” Pattison said.

Things came to a head over a proposal to build homes in an island of unincorporated county land surrounded by the city of Lynnwood.

A property owner on a dead-end street of 1950s-era houses asked permission to demolish their home and replace it with seven new condominium-style houses, something that required a zoning change.

The neighborhood and Lynnwood rallied against the project, arguing the proposal called for too many houses on one property. The neighborhood is made up of older homes on larger properties and the project would stick out like a sore thumb.

Problems already existed with neighborhood septic systems and traffic, and the city and neighborhood said things would only get worse.

Rebecca O’Reilly spoke against allowing the housing project near her home. She wasn’t surprised the project was rejected.

“I don’t think they could ignore the obvious, and the obvious is this does not work in my neighborhood,” O’Reilly said, noting the area’s poor drainage systems and several dead-end streets. “What a nightmare that would be.”

The city of Lynnwood is considering annexing the island of unincorporated land that is the site of the rejected project.

Lynnwood City Councilman Jim Smith said the county’s denial of the project was “good news.” If the neighborhood were part of the city, residents there could rest assured that housing proposals would be more in keeping with the existing neighborhood.

Condo-style homes on small properties don’t mix with single-family residential homes, he said.

“It’s not a good fit,” Smith said. “In fact, it’s a horrible fit.”

A county hearing examiner agreed, and rejected the housing project earlier this year. It soon was revived in an appeal to the County Council, which called for more hearings.

A second county hearing examiner rejected the project this fall. This week, the County Council agreed.

The final vote was built on an unlikely coalition that included the most liberal, most conservative and most senior members of the council: Somers, Republican John Koster and Republican Gary Nelson, respectively.

“It was kind of astonishing to me,” said Nelson, who is leaving the council this month because of term limits. “I had no idea how the votes were going to fall.”

Neighborhoods are bound to change, but the proposal was “pretty radical,” County Councilman Koster said.

“Somers nailed it. Rezones aren’t automatic,” Koster said. “This is a problem we’re going to have time and time again.”

The council has approved many such rezones, Koster said, but it might be time for a change.

“I’m a property rights person and here I am, stuck between the right of a property owner to develop his property and the neighbor’s right to quiet enjoyment of their property,” he said. “But how much is too much? We need to sit down with the cities and talk about what’s appropriate.

“It’s a tough balancing act, but we’re going to see more of it.”

The county has to change what development is allowed in unincorporated areas near cities, otherwise cities will refuse to annex them, Nelson said.

The decision was arbitrary and disappointing, said Ken Williams, a senior planner with Everett-based Insight Engineering, which was hired for the housing project by Brookstone Development LLC.

Since 1995, the county has expected to allow dense housing in that particular pocket of Lynnwood north of 176th Street SW.

“To go back on that now is contrary to all the county’s planning,” Williams said. “It is a total and complete reversal of past precedent. To be honest, I don’t know where this ends up. If these kinds of projects are not allowed any longer, then the county and all the cities in the county are not going to meet the housing targets or population targets they’re mandated by the Growth Management Act to reach.”

County Council chairman Dave Gossett and councilman Kirke Sievers, both Democrats, voted to approve the project and reverse the county hearing examiner.

Denying this project and others like it raises questions about the county’s ability to steer development toward urban areas, “and that places the whole idea of preserving rural areas by using infill (development) at risk,” Gossett said.

“If the council starts making these kinds of decisions, it’s unfair to all the parties to never know what’s going to happen,” Gossett said.

“Growth management will never work” he said, if dense housing projects are turned down in urban areas.

Michael Knight of Edmonds was surprised to hear the County Council will start giving more weight to neighborhood concerns. He lost a fight along similar lines against 55 homes approved on 7 acres on a bluff near the Meadowdale Beach Park.

“On one hand I’m elated, on the other hand I feel betrayed that they didn’t listen to our argument,” Knight said. “There’s a clause in the Growth Management Act to protect the integrity of the existing neighborhood. I’m happy if they go forward. We can lose one battle and maybe gain another.”

Reporter Jeff Switzer: 425-339-3452 or jswitzer@heraldnet.com.