The historic Bourbon block in Kings Cross looks likely to be preserved under a sweeping new plan to revise planning controls for the former red-light area.

After a controversial scheme to replace most of the Bourbon and The Empire Hotel with apartments was withdrawn following community outcry, Sydney City councillors voted unanimously late on Monday to propose heritage listing parts of the buildings.

Under the new plan, the facade of the Bourbon with its features from old 1890s terraces houses would remain, as well as The Empire, from the 1960s, which was once home to Les Girls. The decision will go to full council on Monday and then for public exhibition.

“We agree with all these ideas,” said Andrew Woodhouse, president of the Potts Point and Kings Cross Heritage and Residents’ Society. “They reflect the three Cs of good planning: clarity, certainty and consistency.

“This is a good example for future developers of how not to gain planning consent by giving a two-fingered salute to the community and trying to turn it into a boring blandsville.”

The original development application for the site between the El Alamein Fountain and the Empire proposed a $47.5 million redevelopment, with an eight-storey block of 83 apartments, new cafes, restaurants, bars and shops. Residents held two rallies against it and more than 12,000 signed a petition.

Developer Iris Capital chief executive Sam Arnaout, responsible for the design of the popular new Omnia apartments building at the other end of the Darlinghurst Road strip, withdrew the DA, saying he didn’t want such an unpopular scheme to be his legacy.

Learning of the proposed heritage listing, he said on Monday night: “I maintain I will do what’s in the best interests of the area and the site for all stake-holders. I will work on getting the best possible ‘feasible’ outcome that all can be proud of.”

Helen Crossing, convenor of the 2011 Residents Association, said the decision was “fantastic” for the battle to preserve the character of the area.

“This site is the home of the last of the Victorian terraces in that area, with so many of them being already bulldozed,” she said.

“If we don’t protect our heritage, this area could be decimated and end up looking like Bondi Junction or parts of Alexandria, with its totally bland development. It’s so important to keep the variety and diversity of Kings Cross village and protect what’s unique about it. This is a fantastic idea.”

The plan proposes protecting the 1929 art deco apartment building Kingsley Hall for its heritage significance for pre-World War II flats design, and the three-storey former terraces that now form part of the Bourbon’s Italianate façade.

“The building elements should be conserved and reconstructed and integrated with ongoing mixed uses in a way that conserves its significant fabric and immediate external street edge spaces,” according to the City of Sydney’s report.

The Empire Hotel is also outlined as having high historic and social significance, particularly with the LGBTQI community. It is thought to be the site of the murder of heritage campaigner Juanita Nielsen.

The council proposes revising its development control plan to help manage change so that “new development respects and builds on Darlinghurst Road’s iconic, edgy and historic character and provides diverse activities and serves for the community and visitors”.

Councillor Kerryn Phelps said the package of proposals would be of intense interest to all Sydney residents.

“Kings Cross is an area in transition and we’re seeing a change in its character with some previously thriving businesses now closing and others opening,” she said. “But people don’t want to see massive towers and the character being lost.

“I think the proposed heritage-listing of the three buildings will help maintain the flavour of that part of Darlinghurst Road, which is not only of local importance but also known nationally and internationally as an entertainment and tourism hub.”

At the local chamber of commerce, the Potts Point Partnership, board member Louise Shepherd said the council’s proposal was respected as long as “balanced” development would be allowed to continue.

“We want development that supports the rejuvenation of the area that balances the interests of both residents and business, so that both can co-exist,” she said.