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Sonoma County will not appeal a judge’s decision to cancel its long-sought sale of the old Chanate Road hospital complex, making the largest proposed housing project in Santa Rosa even less likely to come to fruition as originally intended.

The Board of Supervisors voted unanimously in closed session Tuesday not to challenge the July ruling from Superior Court Judge René Chouteau, who said the county incorrectly determined its sale agreement for the 82-acre property was exempt from state environmental review requirements.

The project, which included a proposed 867 housing units, is now stalled at least until county leaders decide what they want to do next. Supervisors are expected to discuss their options at a public meeting sometime in October.

Supervisor Shirlee Zane, who represents the area where the site is located and championed its sale to Gallaher last year, said county leaders are “mourning this lost opportunity to make a significant impact on the affordable housing crisis.”

“We’re standing by the position that we complied with all legal requirements in negotiating the sale,” Zane said. “But also, given the change in the landscape after last October’s fires, we’re choosing to direct our resources to post-fire recovery. ... We don’t have a ton of money to be focusing on an appeal right now.”

A group of Santa Rosa neighbors organized under the name Friends of Chanate sued the county after supervisors agreed to sell the site last year to developer Bill Gallaher.

Neighbors argued the county pushed the deal through without getting a fair price, properly adhering to public-meetings requirements or adequately considering potential environmental impacts.

Chouteau was not persuaded by the lawsuit’s arguments about the sales price or public-meetings rules but sided with the neighbors on environmental grounds — upholding one of their most central claims. He ordered the county to vacate its approval of the July 2017 sale agreement.

Supervisors opted this week to let the judge’s decision stand rather than continue the legal fight into appellate court.

County staff members will now research potential next steps and publicly present supervisors with multiple options, which could include reworking the deal with Gallaher to satisfy environmental review requirements or beginning the sales process all over again.

Gallaher’s team is waiting for more clarity on the county’s next steps before deciding how to proceed, according to attorney Tina Wallis, who represented the developer in court.

“The county is in the driver’s seat, not us, so there really isn’t anything we can do except wait,” she said.

Despite the county’s decision, the developer still has legal standing to appeal by late October, according to Wallis. She said she could not discuss whether her client is considering that option.

Noreen Evans, the attorney for Friends of Chanate, was unavailable for comment Thursday.

However, Ken Howe, an El Dorado Court resident who is a member of the group, said supervisors made the right call to avoid a legal fight that could have delayed the project even more.

“By not appealing, we’re hoping as citizens that it takes less than a year to move on to another step,” Howe said. “It’s an eyesore right now. It’s of no value to anyone, and we want it to be developed. But it just has to be reasonable.”

Following supervisors’ vote to sell the land last summer, Gallaher’s project had begun to work its way through the preliminary stages of Santa Rosa’s planning process. The city hosted a community meeting with the developer’s representatives in June, when hundreds of people — most of them opposed to the project — spoke out about the plans for the site, which is within city limits.

Yet the developer never submitted a formal application with the city, which cannot happen at this point, said David Guhin, Santa Rosa’s director of planning and economic development.

“There’s no project. Now it’s a piece of property that the county owns,” Guhin said. “The county will have to decide what they want to do with that property.”

As county officials moved toward a sale of the Chanate Road property last year, they overcame early blowback from one group of residents involving a portion of the 82 acres they had long understood to be an official open space preserve.

Following a campaign from neighbors who didn’t want to see the 10-acre parcel developed, the county amended the deal to require Gallaher’s team to secure a conservation easement for that part of the site off Beverly Way.

Supervisors remain committed to preserving the de facto open space, said county spokeswoman Briana Khan.

“However the board decides to move forward after all options are presented to them, the county will take the appropriate actions to protect that parcel,” Khan said.