Councillors in Penryn have held firm in opposing plans for a student village at Treluswell following a close vote on Monday.
Supporters of the scheme had said it could provide a preferable alternative to using houses in Falmouth and Penryn, other smaller purpose built sites, or a 'creative village' proposed by Cornwall Council on land owned by a farmer unwilling to sell.
But opponents said the proposal was not in Cornwall Council's masterplan for Falmouth and Penryn and advocated pushing Penryn Campus to build more accommodation on its own land.
Councillor Mary May said the university was currently "in a state" because its plans to build blocks for 1,049 more students on campus were "not going ahead," or at last not going to plan, but the mayor, Councillor Shelley Peters, replied: "Because the university has got itself into a state doesn't mean we should lose land."
Mrs May pointed out that the council would not be losing land as the plan was actually in Mabe, and added that it was also "a good scheme."
She also said that Mabe were against it, nearby residents didn't want it and Penryn had objected to it last time it had come before them, but also pointed out that "if you go back a step" Cornwall Council was eyeing up land at Treliever next door, which would mean compulsorily purchasing a farm from someone who didn't want to sell.
However, Councillor Rebecca Holden said the development "could solve a lot of our problems."
She said the council had to support student accommodation if it was going to support the university and "what it brings," in terms of education, creativity and employment.
She added that they needed to grasp the opportunity to make Falmouth and Penryn "a seat of learning" or the area would be on a "hiding to nothing."
She said: "Having looked at the scheme it's a good one. It offers a prime development opportunity for the university, there could be walkways and cycleways for more environmentally friendly methods of travel.
"It's close enough to Penryn for students to use the facilities without impacting on the town."
Councillor John Langan, the planning committee chairman, called the plans "not the best of a bad bunch, but the best worst evil," and said: "If they put 2,000 students up there that's something like 600 houses. This town and the town next door can't afford to lose 600 more houses."
He added that if Cornwall Council was looking at a compulsory land purchase at Treliever they were "getting serious," and the university was going to expand over the next 20 to 30 years, "no doubt about that."
And he said students would probably want to move in because they were "getting sick of living in squalor," although Councillor Chaz Wenmoth said the halls would be squalor too "after they move in."
Councillor Vicky Bennett said if the council was being asked to look at a proposal for normal housing on the site "we wouldn't be saying no."
Mr Peters said she was concerned if they supported a development not in the council's development plan document (DPD) that would set a precedent and mean they couldn't use the DPD to argue against other proposals, but Mr Langan said the DPD "seems to be a moveable feast" as Cornwall Council has kept changing it.
Ms Holden said they could still support the plans as being "in the best interests of the town," whereas previous proposals not in the DPD had been objected to for other reasons as well.
Mrs Peters added: "I'd still like to see the university do what they said they would do. That's why they have given the new cap."
Mrs May said if all planned student accommodation was built there would be more than needed, and Mr Langan said this would drive prices down and mean it was cheaper for students, tempting them out of HMOs.
Ms Holden proposed that the council raise no objections to the scheme, but the motion was defeated by five votes to four.
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