When the barges finally began carrying loads of toxic sludge out of Brooklyn’s Gowanus Canal last year, the long-awaited cleanup effort was heralded as a milestone for one of the most polluted waterways in America, and for the industrial neighborhood, Gowanus, that grew around it.

Then one day in January, one of the barges sprang a leak and started to sink.

Apparently, little if any of the ship’s toxic cargo spilled back into the harbor, and work resumed. But the symbolism was hard to miss: Gowanus would not be wrested of its confounding identity so easily.

Gowanus, where aromas of sewage and sulfur and burning rubber waft across streets lined with low-slung warehouses, is now at the center of a fight over the future of New York City.

The administration of Mayor Bill de Blasio, in its waning months, is pushing one of the most ambitious neighborhood plans of his more than seven years in office. The enormous project would eventually transform a federally designated toxic Superfund site into acres of parks and shops and some 8,000 housing units — about twice as many as Hudson Yards, a high-end development on the Far West Side of Manhattan.

The proposed development would, if approved by the City Council, make good on developers’ decades-long desire to turn the industrial neighborhood — filled with vacant lots, artists’ studios and eclectic businesses that make things like candles and caskets — into a huge real estate opportunity sandwiched between wealthy Park Slope and Carroll Gardens.

But the proposal arrives as emboldened progressives, dubious about projects that stand to significantly benefit private interests, have helped upend other major development dreams, including the construction of an Amazon headquarters in Long Island City and a commercial and office space expansion in Industry City.

And a group of Gowanus residents fear the plan could erase the neighborhood’s identity and place thousands of New Yorkers in a flood-prone area filled with toxic contaminants. The group has filed a lawsuit that has, for now, stalled the project, arguing that virtual public hearings, a result of the pandemic, are insufficient for neighborhood input.

The plan will test the city’s appetite for big development, even as a housing crisis has increasingly pushed out lower-income residents and the pandemic has further exposed the city’s deep inequalities.

Along with a proposal in SoHo, officials with the de Blasio administration argue that the rezoning would help diversify neighborhoods that have already gentrified and that are relatively white and wealthy compared with the city as a whole, setting the foundation for equitable growth out of the city’s economic crisis. And it would be in line with Mr. de Blasio’s goal of making New York more affordable: More than a third of the new housing in Gowanus would be aimed at lower-income New Yorkers.

“We are finally really at a point where we can clean up the canal, we can bring open space, we can bring 3,000 units of affordable housing,” said Vicki Been, the deputy mayor for housing and economic development. “The time is right to bring this neighborhood up to the modern day.”

The plans have been a long time coming. It was in the mid-1800s when development first began to transform the meadows, creeks and marshland of the Gowanus area. A natural creek was converted into the canal in the late 1800s, and until the mid-1900s, coal and manufactured gas plants, paper mills and other industrial businesses casually filled the waterway with pollutants and sewage.

From the very beginning, the canal would be seen as both a driver and a deterrent of development. For more than 50 years, city officials dreamed of new apartments and businesses in the industrial zone, but the Bloomberg administration was among the first with a concrete plan: In 2009 it proposed rezoning 25 blocks of industrial land to allow for residential and commercial development, earmarking $175 million to mitigate odors and prevent sewage discharges into the canal.

But after the canal was designated a Superfund site in 2010, those plans were dropped. City officials predicted the label — made famous by the Love Canal catastrophe in upstate New York and more than 1,300 polluted sites around the country — would dissuade development.

Those predictions proved false.

The neighborhood, which is between some of Brooklyn’s most expensive real estate, became one of the hottest neighborhoods in the city. A Whole Foods grocery store opened in 2013. That same year the Environmental Protection Agency finalized a plan to clean up the canal, spurring a series of discussions in the community and the city about more parks, housing and infrastructure. The prospect of a federally mandated cleanup drove a spike in real estate speculation, with developers eager to capitalize on a neighborhood transformation.

After years of planning, the ambitious cleanup of the waterway began late last year. But deciding what will happen at the water’s edge has proved to be a thornier question.

Michelle de la Uz, the executive director of the Fifth Avenue Committee, a nonprofit that advocates for low-income housing, has come out in favor of the rezoning, and her group is involved in the plans for a project in Gowanus. She pointed out that development pressures had changed the composition of the neighborhood long before the canal cleanup began.

A report from the Pratt Center for Community Development, a Brooklyn-based nonprofit, found that the proportion of Latino people living in the Gowanus area dropped to 25 percent from 35 percent between 2000 and 2015 as housing prices rose. The rezoning could preserve or even bolster some economic and racial diversity, according to Ms. Uz, a former member of the city planning commission who was appointed by Mr. de Blasio when he was the city’s public advocate.

“If we were talking about rezoning the Gowanus of 20 years ago, then I would be extremely concerned about gentrification and displacement,” she said. “But we’re not. A lot of gentrification and displacement has already happened.”

At the base level, the plan targets about 82 blocks around the canal, making way for a huge influx of new housing, shops and businesses by rezoning many low-density light-manufacturing and commercial areas to higher density mixed-use areas. Many of the plots have dangerous pollutants in the ground, and the plan would require new development to clean out the sites before building.

A new waterfront esplanade would border the canal, connecting waterfront parks and apartments, shops and restaurants.

The plan includes construction of a new affordable complex called Gowanus Green on the site of a former manufactured gas plant. The complex would have 950 units, with at least half geared toward to those who earn up to $56,850 for a family of four.

“Instead of displacing low-income families and people of color, this has the possibility of making the neighborhood more inclusive, of having more low-income and working-class families be a higher percentage of the neighborhood after the rezoning,” said Brad Lander, a councilman who represents the area and who is running for city comptroller this November.

But Debbie Stoller, who is part of a group of neighborhood activists called Voice of Gowanus who are opposed to the rezoning, calls the affordable housing argument a “Trojan horse.”

Ms. Stoller noted that a vast majority of new housing would be at market rate, and that many of the developments, under a set of separate city rules, would get years of property tax breaks.

“You really have to ask,” Ms. Stoller said, “what are we getting for all that loss? Are we getting what we should be getting for all that expense? I think the answer is no.”

But it is the environmental legacy of a manufactured gas plant near the corner of Fifth Street and Smith Street — operated by Citizens Gas Company and Brooklyn Union Gas for nearly a century until the site was sold in the 1960s — that is the focus of many neighborhood activists.

Some residents maintain that coal tar pooling under the surface of the Gowanus Green site would put future tenants at risk, and they are calling for no big towers on that land, and perhaps no housing at all without better remediation.

The New York State Department of Environmental Conservation said it had a plan to allow for development on the site of Gowanus Green while protecting future inhabitants and the environs, in part by excavating soil to a depth of 22 feet in the most heavily polluted area and replacing two feet of dirt across the remainder of the site.

But neighborhood activists are dubious. The state’s original cleanup plan from the early 2000s was scaled back in 2019 after state officials said they determined the coal tar — the main ingredient in what has become known among dredgers as “black mayonnaise” — was concentrated only in certain areas.

The activists’ suspicions were then bolstered when, at a community meeting in December, the E.P.A. official managing the cleanup of the canal, Christos Tsiamis, said he would not want to live there himself unless more was done to remediate the site and keep the coal tar vapors underground.

“Personally, if I were to live in a building like this, I wouldn’t feel comfortable with venting,” Mr. Tsiamis said at the meeting. “I would feel comfortable with preventing, preventing the vapors from entering the building.”

Asked about those fears while appearing on The Brian Lehrer Show on WNYC, Mr. de Blasio said that he was “concerned” but that he would “make sure we get it right.”

“I really have believed for a long time there was a way to do development in the Gowanus area safely,” Mr. de Blasio said. “I think for so many people who need affordable housing, they want to know, of course, that the foundation of it all will be safe.”

A spokesman for the Gowanus Green development team, James Yolles, said that city, state and federal agencies would need to approve the site’s cleanup plan.

“To question whether the site can and will be cleaned to a standard that’s safe for its planned residential and school uses is deeply misleading,” he said.

The opponents of the rezoning also draw strength from an emboldened progressive strain in local politics. Brad Vogel, another member of Voice of Gowanus, said the group had joined an alliance with other groups in neighborhoods like Flushing, Inwood and Sunset Park that have fought rezoning plans.

He said the downfall of Amazon’s rezoning for its new headquarters in Long Island City, Queens, and of the commercial rezoning by private developers in Industry City, about a mile south of Gowanus, “have given us some hope that we are not alone in our concerns about just how unfair this process can be to a neighborhood.”

Even the strongest supporters of the Gowanus rezoning express some apprehension about the city’s plans.

Mr. Lander, for example, said he would not support the rezoning if the city did not also make hundreds of millions of dollars of investments in three public housing complexes in Gowanus.

Kate Brennan, 29, who has lived a block west of the canal for three years, opposes the rezoning, which she fears could bring the same shiny high-rise apartment buildings that she has seen pop up elsewhere in Brooklyn in recent years. She said that the planning process had felt opaque and that she had been unable to grasp fully the particulars of the plan or how she might be able to influence its outcome.

But still, she has noticed how the neighborhood’s population is “exceptionally white,” and how small local businesses like neighborhood corner stores seem to be disappearing.

“I don’t think we would be better off with doing nothing,” she said.

This article was reported with The Hatch Institute, a nonprofit newsroom based in New York City.

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