Dawn and Callum Yates had sought permission to knock down the bungalow, Silsden, on Rope's Hill Dyke, behind Horning Sailing Club.
They plan to replace the structure with a one-bedroom contemporary home with views across the waterway.
However, due to ongoing problems at a nearby sewage treatment plant, known as Knacker's Woods, Broads Authority (BA) members feared the additional property could cause further problems.
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Anglian Water has blamed structural failures in the sewage........