Drum Property Group had planned to demolish the two-storey red sandstone shop frontages and industrial units at Stead’s Place and replace it with a five storey facility compromising 471 student room accommodation, 56 bedroom hotel, 53 affordable flats, a café as well as business and retail units.

But the grassroots Save Leith Walk campaign working against the development unveiled its own vision of how the block could be developed rather than demolished.

At a meeting on Wednesday, which lasted more than four-and-a-half hours, councillors then turned down the application.

Drum Property Group revised its designs for the project in December, reducing the height of the elevation on Leith Walk by one storey to keep the building in line with the surrounding traditional tenement.

These new proposals were recommended for approval by City of Edinburgh Council planners.

But councillors said the plans failed to meet more than half a dozen planning policies, and were unconvinced that developers have done enough to try and retain the sandstone building.

Concerns were also raised about the mix of housing and student accommodation.

Committee member Councillor Chas Booth was scathing about Drum’s proposals for the Stead’s Place site, saying: “I think the arrogance of this developer in ignoring the clearly expressed views of the local community is just staggering. I have never seen an application that was so badly thought out and that has completely failed to listen to local community views.”

Committee convenor Councillor Neil Gardiner added: “I don’t feel that all options to keep the building have been properly or fully explored. The developer has had a model that it has sought to apply. The community has kicked back and said ‘no, that isn’t what we want and that hasn’t been properly explored.

“I hope that Drum will go away and think about what’s been said and come back with a proposal that looks at conserving the existing building and takes onboard what the community has said. The community wants to work with you. This could be a model development for sustainability.”

Drum Property Group said it would consider appealing the councillors’ decision.

Managing director Graham Bone said: “We are naturally disappointed, but not surprised, that councillors chose to ignore the recommendation of their officers to approve our transformational planning proposal for Stead’s Place.

“We remain wholly committed to developing the site, and view today’s decision as another step in what could be a long process. This will include the possibility of lodging an appeal with the Scottish Government.

“It’s a shame that Leith will be deprived of much needed new homes, facilities and improved amenity whilst that process is ongoing.”

A spokesman for the Save Leith Walk campaign said: “We are delighted by today’s decision. It is a victory for Leith, for Edinburgh and for local democracy.

“It is proof that if you organise and engage with local people, if you stay positive and refuse to give up, then you can have a say in how your area is developed. 

“Rarely has Leith’s motto ‘persevere’ been more appropriate.

“We would like to thank the councillors for listening to the people who elected them, opposing the demolition and recognising that the proposed development was wholly inappropriate for this site.”