Kelowna city council has shot down a request to allow short-term rentals in one of the three massive towers proposed for Leon Avenue.
Originally intended as a hotel, the developer had hoped to change plans for the 25-storey, 216-unit building due to strict financing regulations for hotels.
However, council denied the short-term rental application in a 7-1 vote, with Coun. Maxine Dehart not voting due to her involvement with the local hotel industry.
The ambitious project proposes three towers at 25, 29 and 42-storeys tall, all of which would require heigh variances to be approved.
Developer Andrew Beyrouti, who owns Vancouver ticket reselling company VenueKings.com, said the decision to not approve the short-term rental allowance could impact the financial feasibility of the project.
City staff had confirmed that the building would be taxed at a lower rate if approved with the short-term rentals than if it were a hotel.
"Right now, this project is being treated the same as a waterfront project, but in a different location," said Beyrouti to council.
"This is literally the worst area in the entire downtown core and this allows us to have better financial opportunities to keep the property affordable but also allow for the property to happen.
"I know exactly what it would take for them to say yes to getting the property approved, the problem I'm not sure if the math works for that to happen."
The development proposal was first submitted in January, two months after long-time tenants Boyd's Autobody and neighbouring Eco-Clean terminated their leases.
The application also requests 239 fewer parking stalls than city regulations mandate.
However, significant changes are expected to the development plans due to council's decision on Monday.
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