A Cornish parish council is considering appealing a High Court decision in favour of 25 new affordable homes on the outskirts of the community.
Lanner Parish Council took legal action against Cornwall Council's decision to grant planning consent for the scheme, just outside the village, arguing it broke the authority's own housing and countryside protection policies.
It said a local policy stated that only "about 12" affordable homes would be allowed on any one rural site close to the county's larger villages.
As a result, they argued, it was "perverse" to grant Coastline Housing Limited the green light for 25 homes on Tresavean Farm.
But its challenge was dismissed in the High Court on Monday with Judge Anthony Thornton QC saying the limit on the number of homes was not set in stone.
Lanner Parish Council chairman Ashley Wood said it was currently talking to its legal advisers and was "likely" to seek permission to appeal.
"We are, of course, deeply disappointed with this result both as a council seeking to protect and promote the views of its community and in the wider context of Cornwall itself.
"We are still assessing the 21-page judgement in its detail, but our initial reactions give rise to several concerns.
"The decision appears to fly in the face of the principles underpinning the much-trumpeted localism.
"For instance, where previously local need was intended to be established at parish level, there is now the real possibility that Cornwall Council will assess this on a district or even county-wide level.
"The effect of this is that village communities across the county could face development on a scale that far exceeds the needs of their particular villages."