The proposal by the Department of Housing Preservation and Development and developer Artimus Properties was condemned by residents and elected officials because it would have bulldozed recreation areas including a playground, sprinklers and community gardens at the public housing project on West 17th Street.
An HPD spokesman said Monday that the play spaces would now remain untouched.
"There are no plans to displace either play space and the plan to address the parking situation is a work in progress," the spokesman said in an email.
A source with knowledge of the ongoing negotiations said a lot could be built next to the Caledonia, a luxury building on West 17th Street.
In 2005, when Artimus was chosen to build the new affordable housing building on West 18th Street, the company promised to replace displaced parking spots with an underground garage.
Due to rising costs, that plan was scrapped and Artimus decided to move the replacement parking to the current home of the playgrounds instead, sparking community outrage.
The most recent plan unveiled earlier this summer — which was part of a rezoning proposal filed with the Department of City Planning — would have also added more units to the affordable housing development.
"The notion that a playground would be demolished for a parking lot is so appalling it defies credibility," state Sen. Brad Hoylman said at a meeting July 10.
Artimus did not immediately respond to a request for comment, but at that meeting, owner Robert Ezrapour said that the proposal was filed quickly and without much community input because it's "an election year."
Miguel Acevedo, who leads the Fulton Houses Tenants' Association, said Monday he plans to sue HPD and Artimus to force them to return to the original plan to build an underground garage.
The New York City Housing Authority, which owns the property, directed questions on the issue to HPD.