Residents in the Boston suburb of Milton have voted to scrap a zoning plan that was required to comply with the state's housing law, risking the loss of state funding and legal action.

Residents rejected the town's MBTA Communities zoning plan in a 5,115-4,346 vote, according to Milton Town Clerk Susan Galvin, who counted the votes Wednesday night.

The vote represents a setback in the state's implementation of its ambitious housing law, and it could lead to a legal battle and set a precedent for other communities that oppose allowing new housing.

"It definitely sets an example and it makes it look like there's a path for communities to break the law and not be in compliance with state law," Citizens' Housing & Planning Association CEO Rachel Heller told Bisnow Thursday morning. "At the same time, there are more than 20 communities that have submitted their applications to the state for the multifamily zoning districts."

Heller is one of several housing advocates and state leaders who expressed disappointment and shock following the town's rejection of the state-mandated rezoning plan.

The plan would have allowed 2,586 units to be built along the town's four trolley stops and would create two mandatory mixed-use districts in the Milton and Central Avenue Station subdistricts. The plan passed by a 158-78 vote during a Dec. 11 special town meeting, but opponents gathered enough signatures on a petition to force a townwide vote.

Since then, two advocacy groups, Yes! for Milton and Milton Neighbors for Responsible Zoning, have campaigned both sides of the issue. Shirley Leung, a Boston Globe columnist and Milton resident, described the fight between neighbors as "downright ugly."

With this new vote, the town risks legal action for noncompliance and losing state funding opportunities.

Massachusetts Housing Secretary Edward Augustus Jr. said Thursday on X, formerly Twitter, that the vote puts Milton out of compliance with state law.

"While we are hopeful that we can work with the town to put forward a new plan that would bring them into compliance with the #MBTACommunitiesLaw, at this time they are non-compliant, which means they will begin losing out on significant grant funding from the state," he said.

Gov. Maura Healey also expressed her disappointment in the vote.

"There is no greater priority than making housing more affordable," she said in a statement. "Today’s vote is disappointing, but we will continue to make the case for every community to embrace the opportunity that comes with creating more housing and making it more affordable for all."

The town has received roughly $1.7M since 2021 from grants that could be revoked by the state due to noncompliance, according to a letter sent to the Milton Select Board.

In January, Attorney General Andrea Campbell warned Milton officials that they could face legal action if they don't comply with the law, the Boston Globe reported. Campbell said in a letter to the select board that she would move forward to enforce state and federal fair housing laws.

"When a municipality elects to evade its responsibility to comply with the law, we will meet our responsibility to enforce the law," Campbell said in a statement about the vote.

Real estate leaders and housing advocates also expressed dismay at the results of Milton's vote.

"The future of Massachusetts depends on communities encouraging new housing production of all types and for all income levels," NAIOP Massachusetts CEO Tamara Small said in a statement to Bisnow, adding that the organization is "disappointed" in Milton's vote. "We urge the Town of Milton to do its part to allow for the zoning of this much needed housing."

Parent + Diamond Managing Partner Ralph Parent, whose firm builds housing throughout the region and is proposing a project in Milton, said he supports the goals of the MBTA Communities Law.

"It’s unfortunate that a precedent has been set, and time will tell the effects on the Town of Milton and the communities of the Commonwealth," he told Bisnow in a statement.

Jonathan Berk, a community development consultant who sits on the board of Abundant Housing Massachusetts, posted on X about the vote.

There are great people in Milton who worked tirelessly over the past few weeks and months to ensure Milton was a part of the housing solution, not the problem.

I’m sorry to you for the embarrassment that is about to befall Milton in the local and national press & in the courts.

— Jonathan Berk (@berkie1) February 15, 2024

Abundant Housing Massachusetts Executive Director Jesse Kanson-Benanav also posted a statement on X highlighting the amount of work that went into the zoning plan.

"It's disappointing to see the results from Milton where a margin of just a few hundred voters in a town of 27,000 residents overturned a thoughtful, thoroughly debated zoning package that represents the community's broader housing priorities," he said, adding that many other cities and towns have passed the required zoning plans to allow more housing.

There are 27 communities that have complied with the MBTA Communities Law, according to CHAPA.

Apart from the 12 communities that had Dec. 31 deadlines to comply, Arlington, Danvers, Dedham, Essex, Grafton, Haverhill, Lakeville, Lexington, Mansfield, Northbridge, Pembroke, Salem, Stoneham, Taunton and Wareham have submitted applications to the state for approval.

CHAPA's Heller said she hopes Milton can bring forward a new plan that will bring the town into compliance with the law.

"I know that the people who have been working so hard to put good zoning in place, to put good rules in place to allow for growth and development in a way that preserves what they love about Milton, they're going to keep working," Heller said. "And hopefully those that were saying no and saying no to this proposal have ideas that they'll bring to the table that can get Milton to say yes."