Disappointment was expressed this week by councillors and an MP after it was announced Asda was pulling out of the Newhaven Eastside development.
The company was given planning permission to build a supermarket on the site two years ago.
Residents commenting on social media said the town needed more facilities if it was going to bear the burden of more homes.
Lewes District councillor Steve Saunders (L.Dem, Newhaven Valley) said: “I was aware that things were not progressing well with Asda although it’s still not clear precisely why.
“It is hugely disappointing that having gone so far they have decided to withdraw.
“Just when you think things are starting to happen we get another slap in the face for daring to hope.
“I will be interested to see what happens in the high court although I don’t expect this will change their mind.”
Last week Newhaven Eastside LLP announced Asda had pulled out of the scheme which included building 190 homes, a petrol station, supermarket and office or light industrial space.
Newhaven LLP said it had instructed its solicitors to issue proceedings in the High Court to enforce the commitment Asda made.
District councillor Rod Main (L.Dem, Newhaven, Denton and Meeching) added: “I am very concerned that the housing and access road elements of this scheme are the only things that remain and without the financial support offered by ASDA towards the almost £1 m of 106 monies that the town stood to gain, the developer will try and force the council to let them proceed without having to recompense Newhaven.
“The same team of developers has currently demolished the nearby Parker Pen site and is trying to get permission for even more houses and is already reneging on promises made to Newhaven Town Council.
“I fear that future regeneration of the town is being stifled, as commercial land is lost to housing development, with the transport, health and education infrastructure unable to support them.”
The Parker Pen site was meant to include a 200 seat community centre but this part of Newhaven Eastside LLP’s proposals has been withdrawn. It includes 145 homes and open space.
A spokesperson for Asda said: “Due to the current discussions it would be inappropriate for us to comment at this stage.”