THE Nappers Wood redevelopment scheme in Fernhurst has failed to get the £1.7 million shortfall met by Chichester District Council.
At a meeting of the executive board on Tuesday, councillors decided against providing Chichester District Community Housing with the money to start work on the £5.8 million project.
A spokesman for the council said that the council had "sympathy for the idea of redevelopment" as long as it resulted in an increase in the number of houses on the site.
"At the moment, CDCH wants the money only for its own houses, but if it changed the number of dwellings, it would get Housing Corporation funding," she said. "The ball's in its court."
Residents living on the 110- home estate will now have to wait even longer before a final decision is made on the long-awaited scheme.
Last month, at a meeting of the Nappers Wood steering committee, residents spoke of their anger at having to put their lives on hold as they faced an uncertain future.
The plan to demolish the homes and replace them with new homes is the preferred option of CDCH and the majority of the residents on the estate, but two other options were considered during the consultation process.
These were either refurbishing all the homes or demolishing some homes and refurbishing others.
Some of the more elderly residents have given their support to the refurbishment option, to avoid the stress and expense of moving house.