Aboriginal communities in Alice Springs' town camp have rejected, for the final time, an offer to hand control of their housing to the Northern Territory government in return for $60 million in commonwealth funds.
Federal Indigenous Affairs Minister Mal Brough, who spearheaded the plan, said he was deeply "hurt" by the rejection.
"I am deeply disturbed and hurt," he told reporters.
"You have no idea how difficult this is when you have witnessed the things that I have and the stories that I know about and the fact that only a matter of a couple of weeks ago another woman was brutally murdered in these places."
Later, he told ABC radio he was in despair.
"I'm in despair. I would have thought people would have been champing at the bit."
The rejection was the second in less than a week and comes after 14 months of protracted negotiations.
Under the original proposal, the 18 housing associations which oversee the camps could retain control of the land if it was unconditionally sub-leased to the NT government for 99 years.
The camps are notorious for high levels of serious crime and are home to rampant substance abuse.
The town camps come together under the banner of Tangentyere Council and lawyers for the council, in a letter to Mr Brough, said there were many concerns with the deal.
"There has been no proper process of negotiation and Tangentyere has not had the opportunity to obtain proper professional advice," the letter said.
Tangentyere said the deal would leave the 18 camp associations with "no legally enforceable rights or entitlements in relation to any aspect of the future land use, management and development of the camps".
Opposition indigenous affairs spokeswoman Jenny Macklin said she was disappointed by the outcome.
"I am really disappointed that the parties couldn't reach an agreement on funding for the Alice Springs town camp upgrades," Ms Macklin said.
"That money is desperately needed to make sure people living in the town camps have safe housing and basic services.
"Tangentyere Council, Mal Brough and the territory government should take responsibility to make sure that such a disadvantaged group of people don't miss out on basic services that other Australians expect."
Mr Brough said the $60 million would now go to another needy community.
"The $60 million is off the table."
He suggested the money may go to the West Australian community Halls Creek which has already received more than $100 million in assistance.
"I said to (WA Indigenous Affairs Minister Michelle Roberts) in the event that I have seriously additional money, will you have the potential to go back to your cabinet and get more resources for better reforms and better outcomes.
"She indicated both publicly and privately there that she could, so there is numerous communities in Western Australia that can benefit and I hope that they will."