Melton borough councillors blocked the scheme, at the derelict Millway Foods site, off Colston Lane, in December, after voicing a number of misgivings.
The planning committee were unhappy about the proposed scale of on-street parking and said the development was contrary to the Clawson Hose and Harby Neighbourhood Plan.
Members also refused it on the grounds that the design of the properties was ‘not sympathetic to the character of the area’.
The cheese factory vacated the site back in 1999 and it sustained significant damage 10 years ago when a major blaze took hold there.
It is considered an eyesore by local people and the potential for housing is seen by the developers as a way of tidying up that area of the village and providing new homes for villagers, including affordable homes.
After meeting the applicants on site, members of Clawson, Hose and Harby Parish Council asked for a financial contribution to the building of a new village hall and to health services at the nearby Long Clawson Medical Practice because of the impact the scheme would have on local infrastructure and services.
In a letter to the planning committee in September, the parish council stated it had no objections to the development.
Three letters of objection were received by the borough council, citing fears that the village could not cope with the extra homes, the increased traffic and negative impact on the quality of life of neighbouring villagers.