FALMOUTH — Town councilors withdrew a proposal Monday night that would have been a first step in clarifying controversial zoning regulations that protect homeowners’ views of Casco Bay.

The proposal, by the council’s Community Development Committee, would have created a Waterview Overlay District encompassing all properties east of Route 88 in the Foreside and Flats neighborhoods.

Committee members said they want to “tweak” the proposal because they fear it may go too far in curtailing development rights of property owners.

“This is a property rights issue,” said Councilor Will Armitage, a committee member. “We want to help, but the struggle becomes whose rights (take priority).”

The rights in conflict are those of waterfront property owners and those of the people who live behind them, said Tony Payne, the committee’s chairman.

“Who has standing?” Payne asked rhetorically. “It’s a nasty, tough issue.”

The cause for concern is clear. Waterfront property values have skyrocketed in recent years, and tax bills on Foreside lots are 2½ to nine times as much as bills elsewhere in Falmouth.

The council took a unique stand in 2006, when it passed zoning to protect water views after a number of waterfront property owners built larger homes that obscured the views of upland neighbors.

Current zoning bans additions that would have “a significant adverse impact on water views” from nearby properties. Most communities leave neighborhood squabbles over views and other property-value issues to the courts.

Last fall, the Falmouth Board of Zoning Appeals asked the council to review waterfront zoning to make it more clear and less cumbersome.

In the proposed Waterview Overlay District, all property owners — including owners of lots that conform to the zoning — would need conditional use permits to expand single-family structures.

They would have to demonstrate that the expansion would be compatible with the neighborhood and wouldn’t have significant adverse effects on others’ water views. Currently, owners of conforming properties need only building permits to make allowed changes.

Councilor Fred Chase called the proposal “dynamite” because he fears it would invite lawsuits. He said he wouldn’t support any change that makes waterfront zoning more restrictive than it already is.

The council returned the proposal to the Community Development Committee immediately after a brief public hearing Monday night, during which a few residents spoke in favor of the overlay district.

“We’re heading in the right general direction,” said Don Staples, who lives on Pitt Street, near the Town Landing.

The committee, with help from Town Planner Amanda Stearns, is developing a second waterfront zoning proposal, which would introduce a neighborhood negotiating process to the review of projects in the overlay district. Neighbors could sign off on a project, or the town’s staff would help negotiate a resolution before presenting it to the appeals board.

A third proposal, likely to be the most controversial, would call for changes in the dimensional requirements within the district, so the size and placement of homes would be more in keeping with the historical appearance of the waterfront area.

Many waterfront homes that were built at the turn of the last century were one- or two-story cottages on small lots. Zoning passed in 1965 established a minimum lot size of 20,000 square feet; the maximum height allowed in the waterfront area is 35 feet.

Town officials would review the sizes of houses and lots throughout the overlay district and establish reduced dimensional requirements reflecting a majority of properties. The new requirements would stop short of regulating architectural style.

Staff Writer Kelley Bouchard can be contacted at 791-6328 or at: kbouchard@pressherald.com