ENCINITAS — A hugely contentious Leucadia housing proposal appears to meet required environmental standards, the Encinitas City Council decided late Wednesday, denying an appeal of the project filed by neighboring residents.

The council’s vote — 4-1, with Councilman Mark Muir opposed — appears to put the city on a course toward yet-another lawsuit related to the state’s controversial “density bonus” law, which allows developers to put more homes on a given lot than normally would be permitted. In exchange, developers must agree to set aside some of their proposed housing for low-income people.

Felix Tinkov, an attorney representing the residents, told the council he had been “authorized to litigate this matter” if the appeal was denied.

The residents had argued that the environmental impact report on the nine-home project was badly flawed. The small development would be built on a 2.25 acre lot on Fulvia Street.

“I see no reason not to allow development out there, I think we just need to get it right,” Tinkov said.

He told the council that resolving the neighbors’ proposed lawsuit was likely to take years, but offered to participate in a city mediation program with representatives from the developer, CityMark Communities.

CityMark Vice President Russ Haley declined Tinkov’s offer, saying his company has already redesigned its housing plans multiple times because of changes in city regulations resulting from a Building Industry Association lawsuit and because of requests made by city planning commissioners.

The Planning Commission initially heard the proposal in March; asked developers for a redesign to make the proposed homes’ exteriors more varied; and ultimately voted to approve the redesigned plans in late April.

CityMark is proposing to build its nine homes on a triangle-shaped lot at the intersection of Fulvia and Hymettus Avenue. One of the nine homes is to be set aside for low-income residents, and because of this the developers are allowed to put two more homes than normally would be permitted on the site. The city also is easing its lot size requirements, so that nine homes can fit on the parcel.

Before its vote Wednesday, the council questioned city staff members and the developer about flood-control measures. During heavy rainstorms, Leucadia roadways are overwhelmed with water, and the city has struggled for years to resolve the drainage woes. Council members said they wanted to be absolutely certain this project’s proposed stormwater detention basins and other flood-control measures would be enough to help mitigate roadway problems.

City planners said the plans would likely help resolve part of the problem, but that the developer is only responsible for mitigating the impacts of its own project — not all the unrelated flooding problems in the area.

Most of the council members said flooding was their biggest concern and that they believed the developers’ plans would help that situation. Councilman Muir said he felt the neighboring residents had made their case that the higher-density housing project would change their community’s character and that’s why he was voting no.

In recent years, Encinitas has become a battleground for “density bonus” projects. One recent case — a fight over the Desert Rose “density bonus” project — was appealed up to the state Supreme Court by neighboring homeowners who said it contained far too many homes for their rural area. In January, the court declined to hear the residents’ appeal, thus letting stand a state appellate court decision that found in the developers’ favor.

The city also has been sued by building industry representatives. Last year, Encinitas settled a lawsuit filed by the Building Industry Association of San Diego County over the way the city calculates how many homes are allowed on a given lot. Under the terms of that agreement, the city was required to rescind recent changes that density bonus opponents had sought.