KITCHENER -- A proposed high-rise on Mill Street in Kitchener won't go ahead following pushback from a local community group.

Instead, the developer hopes to move forward with a townhouse complex that got a blessing from neighbours.

"The overall scale and size of this building, in the community's opinion, would have overwhelmed this neighbourhood," said Jane Pellar of the Mill Street Development Working Group.

The development sits on two acres of land near Queen and Mill Streets, backing on to the Iron Horse Trail.

The developer originally proposed a 176-unit complex, including a 12-storey tower and townhouses. Now, they're presenting a compromise hoping to keep the townhouses. That means the loss of around 100 units and five affordable housing units.

Joseph Puopolo, chief marketing officer for Polocorp, said the situation isn't ideal, but it will allow them to get the project done.

"Trying to get more density is really crucial and crucial to the cost of housing we have to increase density," he said. "While it wasn't our preferred option, what we presented is what we thought was the best for the neighbourhood, we presented a compromise in a way to move forward.

"Our vision was to create streetfront and trail fronting properties for a very pedestrian friendly plan, with a tower out over Victoria Park."

City officials recommended the original proposal.

Puopolo said they chose to work with the neighbours.

"We have a lot of respect for the Schneiders Creek Association," he said.

However, he said that won't always be the case.

"This was a one off," Puopolo said. "In other situations, they will be looking for more density. It makes sense for the community.

"We invested a lot in the LRT and the transit, and the region only has two ways it can grow: up or out."

Housing advocates said the losing 100 housing units will have an impact on the market, since there are so many newcomers coming to the area from the GTA.

"There is always going to be that domino effect," said housing advocate Lesley Crompton. "But even then, if we are building new units that are purely for newcomers from Toronto then we are really not solving underlying issues."

Meanwhile, the neighbourhood group says this outcome in a win-win and an example of sensible intensification.

"I think there is a respectful way to do intensification while still respecting the existing neighbourhoods," said Pellar. "For ous that means a carefully planned out type of intensification."

Details of the new proposal have not yet been finalized and need to be approved by council.