Plans to build new houses on the site of a former Blackpool warehouse failed to win approval after councillors branded the rooms too small.
It was claimed the application by the Zell-am Group to build three terraced houses on land at the back of Wren Grove and Royal Bank Road in Marton represented 'over-development'.
A number of residents from areas including Preston Old Road, Royal Bank Road and Wren Grove had also objected to the scheme.
Coun Andrew Stansfield told Blackpool Council's planning committee: "We are going to end up with very small houses with very small rooms, not much outside space and tight access.
"I have looked at some properties which do meet technical standards, but if two people are in the living room and a third person wants to enter, someone has to leave."
Coun Lynn Williams said: "I don't like infill squeezing things in behind other buildings and I think there will be an impact on the amenity of neighbouring properties."
Planning officers said the size of the rooms did surpass national standards for new build housing.
But the committee agreed to defer the application to allow further talks with the developer including around the possibility of reducing the number of new homes down to two.