GBM UK applied to remove the condition in October saying the facilities were “no longer needed”.
Instead, it offered £49,000 towards off-site provision of sports facilities.
Simon Grantham, of GBM, told Local Democracy Reporter Daniel Jaines that he had decided to have a “different approach” and a “change of direction for the overall scheme”, but would not discuss how the plans would progress further.
In November, councillors agreed to allow GBM to build 54 homes on the Park Avenue site.
However, the condition to replace the facilities, which was applied on a 2016 proposal, remained in place.
The application to remove the sports facility requirement had received more than 50 letters of objection.
Many of the letters were a template letter which repeated arguments from Louth Town Football Club.
The team previously said it was “desperate to get back” into the town and that the club needed a replacement stadium to progress to higher tiers. A template letter sent by some of the objectors pointed to how Skegness Town, which had a similar situation but its facilities were replaced, is now on the top of a higher football league.
Other residents feared the continued loss of the ground would result in fewer young people taking up sport or physical activity, as well as an increase in anti-social behaviour.
Rebecca Padbury-Pennell said: “Louth needs kids to have focus and a green area on which to play that isn’t covered in dog mess.
“We need to think of their future and what benefits (both physically and mentally) and skills playing in a team game bring.
“Louth Town FC, when they were actually central, were the community club.”
Sport England has also objected, saying there were no “clear proposals to secure the delivery of equivalent or better replacement facilities to compensate for the loss of sports/playing field provision at Park Avenue”.
It is the third time the organisation has objected to a similar application.
Louth Town Football Club has been contacted for comment.