County supervisors unanimously voted on Tuesday to strike down an appeal from Stinson Beach residents opposed to their neighbor’s residential development project, which for months has spurred a debate on whether new houses should—or legally can—be built in an area that figures to be ground zero for the anticipated impacts of sea-level rise.

Though supervisors said the development could proceed, they also shrunk the size of the proposed home and garage almost 25 percent.

Since February, neighbors Kathleen Hurley and Erika Lowry have sought to prevent Heidi Hjorth, of Mill Valley, from constructing a 1,400 square foot house and 500 square foot garage that would, according to the neighbors, exacerbate flooding to nearby homes along Easkoot Creek. Ms. Hurley and Ms. Lowry pointed to a rule outlined in the county’s Local Coastal Program—which governs development in Marin’s coastal regions, such as Stinson Beach—that prohibits building in 100-year floodplains, as defined by the Army Corps or Engineers.

But strangely, the Army Corps has never defined 100-year floodplains anywhere; instead, that designation has been made by the Federal Emergency Management Agency for flood insurance mapping purposes. It’s this detail that Ms. Hurley and Ms. Lowry relied on heavily to support their appeal, and which prompted the assistant director of the county’s Community Development Agency, Tom Lai, to send out a letter in July to over a third of Stinson Beach’s residents informing them any projects for improving homes or adding new structures could be denied by the California Coastal Commission.

Previously, the county’s Planning Commission had denied the neighbors’ appeal, and a second appeal to the Board of Supervisors remained stuck in limbo due to the L.C.P.’s language ambiguity and a letter from Coastal Commission staff that said development in the flood area was indeed prohibited.

But Ms. Hjorth and her attorney, Len Rifkind, have argued that denying approval could result in an illegal “taking” of privately owned land—meaning that the commission could be liable to compensate Ms. Hjorth for any economic losses incurred due to government prohibitions on development. And fundamentally, Mr. Rifkind said, to uphold the appeal would be unfair to Ms. Hjorth, given that she was unaware of the L.C.P. rule when she first filed a permit application over a year ago and that 28 other housing projects had been considered and approved by the county since the L.C.P. was adopted in 1981.

“We can’t un-ring the bell about what to consider,” he said. “But we can say that these are the rules.”

Supervisor Steve Kinsey concurred with Mr. Rifkind’s stance, a slight change of course following his advice in April to his fellow board members that they should hold off on a decision until the California Coastal Commission had ratified amendments—particularly related to the environmental-hazards portion, where the Army Corps language is found—to the L.C.P. But that process has been much more slow-going that originally anticipated, and Mr. Kinsey was swayed by Ms. Hjorth to decide on the issue before the L.C.P. is expected to be updated this April.

“Fairness is a job that we have as supervisors, to balance all issues,” said Supervisor Kinsey. “It would also be ruinous for the hundreds of people that live in [Stinson Beach] if we were to fully enforce this policy going forward.”

Prior to a vote on the appeal’s denial, Mr. Kinsey laid out a set of conditions for revising Ms. Hjorth’s design plans that cut down the house’s proposed size by nearly 25 percent. Doing so, he said, might help alleviate concerns from neighbors that the relatively large house would be out of keeping with the town’s aesthetic character.

Moreover, he annulled the Planning Commission’s earlier approval of the project, saying that the body “did make mistakes or some errors in the interpretation of the Local Coastal Program and the application itself,” though he did not specify those errors.

He added that the county’s draft of an updated Local Coastal Program removes the restrictive language, though that draft has not been approved by the Coastal Commission. 

Ms. Hurley and Ms. Lowry now have ten days to file an appeal of the project with the commission. They declined to comment on Tuesday following the vote, though an advocate for the appellants, Scott Tye, hinted that they might do so.

“We have to wait and see what they do and finish up with the applicant,” he said.

For her part, Ms. Hjorth took issue with Mr. Kinsey’s modifications to her home. Along with several setback revisions, he knocked the house’s size down from 1,400 square feet to 1,100 square feet, and shrank the garage from 500 down to 300.

“I’m not happy about that,” said Ms. Hjorth, whose real estate business is based in San Francisco. “But I’m willing to do it, if that’s what it takes to be done with this.”

To date, Ms. Hjorth said that she has invested almost $500,000 in the project for design revisions and lawyer fees.