A massive new $300 million highrise development for downtown London, the biggest in the city, stalled Tuesday at a city committee.

Rygar Properties Inc.'s proposal to build the multi-tower project with more than 700 units was blocked when the planning and environment committee sent it back to staff for more study, with an eye to preserve a row of stately, albeit run down, Victorian row homes known as Camden Terrace.

"We have to decide what to do, whether we go to the (Ontario Municipal) Board. The goal was to work in a positive fashion with the city," Sal Vitiello, a partner at Richmond Architects in Toronto representing Rygar, said after the vote.

The problem is the soil beneath the homes is contaminated to a depth of three metres and the houses have to be removed to clean the site.

"To remove it and reinstall is possible but it means taking the buildings down brick by brick, that is the issue and once you've taken it down," it loses its heritage value, Vitiello said.

Heritage advocates cheered the committee vote that will go to city council next week. They warned the city was poised to lose a vital part of its history if the 140-year-old row houses were torn down.

"I am glad the committee has referred it back. We can contribute to that discussion, we can work with the developers and staff," said Sandra Miller, spokesperson for the local branch of the Architectural Conservancy of Ontario

Rygar plans to build a nine-story building flanked by towers of 38 and 29 stories on a block of Talbot Street between Fullarton Street and Dufferin Avenue.

The proposal sparked a lengthy debate at the committee meeting with many in the public gallery calling to preserve Camden Terrace, although city planning staff supported the development.

"This was difficult for us . . . we are working with the applicant to see what we can save on the site," planning director John Fleming said during the meeting.

"We feel we have struck a balance, there is preservation here."

Councillors Phil Squire and Jesse Helmer supported Stephen Turner’s motion to send the issue back to staff. Coun. Tanya Park and Mayor Matt Brown voted against Turner’s motion.

The development is supported by downtown business groups, who hailed the number of residents it would add to the core.

"We have talked a lot about feet on the street to make the city work," said Bob Usher, a member of Downtown London.

In the last 12 years, Covent Garden Market has gone from $4.4 million in annual sales to $12 million, "because development has been allowed. It is important to continue that growth," said Usher.

The downtown is also under-serviced when it comes to residential development, said Janette MacDonald, director of Downtown London.

"We have zero vacancies downtown, we need development. This is a great opportunity for London."

The development was first proposed in 2014, and it was for 248 units, but it has grown significantly, said planning staff.

City staff also praised the "design excellence" of the development that would include 1,000 square metre floor plates and four storeys of underground parking.

The committee also heard the project would generate $10 million in development charges, but they would be paid by ratepayers, not the developer.

"This does strike the right balance, we set a target of infill development of 45 per cent. That is ambitious," Mayor Matt Brown said during the meeting.

"We want to grow inward and upward."

Not all in the public gallery spoke in support of saving the row houses. One man said the buildings were in poor condition and should be torn down because they are a health hazard.

But the poor condition of the buildings led to a discussion of "demolition by neglect" -- when old buildings are left vacant long enough, a discussion over demolition becomes academic.

"I walked by that building for years and it was falling apart, and there are a number of such buildings left empty. I hope you can address demolition by neglect as a council," said Kate Rapson, with the Historic Woodfield Community Association.

A proposal to "commemorate" the buildings with a display in the lobby featuring details of the design and style also sparked anger.

"It makes me sick to think of Camden Terrace being torn down and then commemorated. Why would you commemorate an existing building?" said Maggie Whalley, also with the London office of the Architectural Conservancy of Ontario.

"Authenticity is priceless. You have deemed this an architectural gem, why replicate it? The way forward is to designate (as a heritage property) and not replicate," she said.

"We don't want a black box."