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The Arlington Heights Village Board voted 7-2 Monday night to approve the controversial Luther Village retirement project.

The board also approved changing the zoning for the retirement complex to institutional from single-family residential at a lenghty meeting in Forest View High School`s theater, 2121 S. Goebbert Rd.

In return for the favorable vote, the developer agreed to trim 20 townhouses off the perimeter of the project, reducing the total number of units to 668 from 688.

”We`re pretty pleased,” said Dennis J. Stine, senior vice president of Charles H. Shaw Co., which along with Lutheran Home and Services for the Aged has proposed the retirement project to be built on the 51 acres behind the present Lutheran Home at 800 W. Oakton St., Arlington Heights.

”It has been a long, hard grind, but the village has heard all the issues very thoroughly and, of course, we agree with the conclusion of the trustees,” he said.

As proposed earlier this year, the project was to have contained 917 units in buildings up to six stories tall.

But opposition from owners of neighboring single-family homes prompted the village Plan Commission to whittle down the plan to 761 units in structures no taller than four stories before passing it on to the Village Board.

The density was still too high for most village trustees, who in June advised the developers to reduce the number of units even further.

The Lutheran Home and Shaw came up with the plan for 688 units largely by replacing one-bedroom units with larger, two-bedroom residences. The basic concept of four midrise structures in the interior of the project buffered by single-story townhouses around the perimeter remained unchanged.

The 668-unit project that was finally approved Monday ”will still work financially,” Stine said. ”We`ll just have to make some adjustments to our costs in some areas such as landscaping. We`ll just have to watch all of our costs very closely.”

The controversy split Arlington Heights between those opposed to Luther Village, who said it would bring apartments into a neighborhood of single-family homes, and those who supported it because of the need to house the area`s growing senior population.

Supporters also cited the Lutheran Home`s right to develop its land as it had always intended. The present Lutheran Home opened in 1953, and it had held in reserve the acreage behind it for the eventual construction of retirement housing.

More than 150 homeowners who attended the meeting Monday night reacted to the board`s decision with either resignation or dismay.

”The trustees were given a small piece of bait and they took it,” said Jeffrey C. Socher, president of the Sherwood Improvement Association, a homeowners group. ”I still would have liked to have seen a bigger decrease. The project will be nice, but it still will be too big for the surrounding area. At the same time, the village has thrown out its apartment policy.”

The village`s apartment policy states that only apartments can be used as buffers between single-family homes and other nonresidential uses such as stores or office buildings.