Camden Mayor Dana L. Redd finalized a legal settlement Thursday with residents in the proposed Lanning Square redevelopment site, effectively prohibiting the city from using eminent domain to seize homes there.

More than 400 properties are protected under the deal, following a nearly two-year legal battle over the city's decision to redevelop the 51-acre site to make way for condominiums, houses, and a new medical school run by Cooper University Hospital and Rowan University.

"Camden is moving forward with the residents at the table," Redd said at a news conference Thursday in a Lanning Square park. "The resurgence of Camden will include everyone, including those who were here in the difficult times."

Located across the street from Cooper University Hospital, Lanning Square's proximity to downtown and the waterfront puts it right in the center of the city's plans to transform itself into a medical and educational hub, drawing new residents and businesses.

But Lanning Square residents opposed the project from the start, an almost inevitable scenario in Camden redevelopment projects, where future gentrification threatens to push the city's largely low-income residents from their homes. Thirty-eight Lanning Square residents filed lawsuits against the city, challenging its assessment of the neighborhood as blighted, a necessity in declaring a neighborhood a redevelopment zone.

Even with Thursday's settlement, many Lanning Square residents said they remained cautious of the city and feared that a surge of development would eventually drive up their taxes and force them out.

"When the condos go up, you're going to see a lot of residents pushed from their homes. We can barely afford the taxes now," said Tina Wilson, 63, whose Lanning Square home has been foreclosed on.

The attorney for the residents, Olga Pomar of South Jersey Legal Services, said foreclosure rates in the neighborhood were high.

"If this redevelopment really starts to take off," she said, "the residents are going to have to come up with some creative thinking if they want to stay in their homes."

Once plagued by drug-related crime, Lanning Square has seen a resurgence of late. Crime and drug dealing are still evident, but mothers can now play with their children in the playground, and neighbors feel comfortable chatting outside the neighborhood store.

"It was crazy when I first started working here - all-out war," said Antonio Rosado, who has worked at his family's bodega in Lanning Square since the mid-1990s. "It's quieter now."

Tired of watching drug dealers rule the neighborhood, residents banded together and said they pushed drug dealing if not entirely out, at least to the periphery.

"When we saw them taking over a corner, we'd call the police - even go out there with a bull horn and tell them to leave," said Sheila Davis, a member of the Lanning Square West Residents in Action. "It worked."

Now the community group is turning its attention to keeping the neighborhood intact once redevelopment gets going.

The medical school is slated to open in 2013, and if city planners are right, retail and residential development shouldn't be far behind.

Keith Stewart, president of the community group, said he planned to keep a close eye on the city through the process.

"You can't turn your back," he said.

Contact staff writer James Osborne at 856-779-3876 or jaosborne@phillynews.com.