Residents of the Gardens section of Mount Holly have won a reprieve to the town's plan to demolish their homes as part of a neighborhood redevelopment project.

In a ruling Wednesday, the U.S. Court of Appeals for the Third Circuit said the township could not file for eminent domain - which would require homeowners to sell their residences to the city - while an appeal by residents to save those homes was pending.

A federal district court dismissed the residents' challenge to the township's redevelopment project in January, leading about 30 residents to file an appeal.

Mount Holly has destroyed homes in the area for several years since the Gardens was declared blighted in 2006. Plans call for the neighborhood to be transformed into a mix of housing and retail space. New homes are expected to cost $250,000 or more, beyond the means of the low- and moderate-income families and elderly who would be displaced, advocates for the residents say.

"Our clients are not looking for a windfall," said Kenneth M. Goldman, director of litigation and advocacy for South Jersey Legal Services, which is representing the homeowners who filed the appeal. "They just don't have any other place to go."

More than 200 property owners have worked out deals with Mount Holly, allowing for the removal of dozens of buildings that sometimes has left a single rowhouse standing. The township has offered relocation assistance to residents and initially offered them $30,000 to $50,000 per home.

Those who remain find it "stressful to see the rowhomes disappear," Goldman said. Opponents to the demolition had hoped plans would include rehabilitation of some existing structures, including residents' homes.

Homeowners also have sought affordable units to purchase in the new development, Goldman said. Mount Holly's proposal to provide rental space was not acceptable, he said.

Attorneys for those fighting the plan say it violates the federal Fair Housing Act and is discriminatory because the area's lower-income residents are predominately African American and Hispanic.

M. James Maley Jr., a lawyer who is representing Mount Holly, said the township had compassion for the homeowners and had "bent over backward" to accommodate those who wanted to stay in the neighborhood.

"We have yet to file a single eminent domain," Maley said Thursday, noting that the township acquired about 230 properties since 2006 and demolition had been ongoing. As a result, the area looks as if "a bomb has gone off," he said.

"It's just not a happy place to live," Maley said of the neighborhood's current state.

The Gardens' rowhouses were built in the 1950s for military families. Over time, the area suffered from deterioration, absentee landlords, and crime. Mount Holly's plan calls for a development off the Route 541 Bypass that includes 228 apartments, 292 townhouses, and 54,000 square feet of commercial space.

Olga Pomar, lead lawyer with the Princeton firm of Potter & Dickson, which also is representing residents who filed the appeal, said the new court decision was an important win.

"Despite enduring years of the township aggressively dismantling their community, many resident homeowners have remained because they cannot afford to move and want to continue to live in Mount Holly," Pomar said in a statement Thursday.

To obtain the injunction, Pomar said, residents had to demonstrate that the lower court's dismissal of their challenge to the project would likely be reversed.

Contact staff writer Barbara Boyer at 856-779-3838 or bboyer@phillynews.com.