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CALA Homes (Midlands) Ltd has lost its appeal against a decision by Cotswold District Council to refuse permission for a development of 41 flats on the site of Station Garage in Moreton.
The decision by planning inspector Ken Barton was announced this week.
He decided the main issue was whether the development would make adequate provision for affordable housing, taking into account the aims of national and local policies and the nature of the site.
Cala offered 10 per cent of the homes for affordable housing, but the council argued this was inadequate and would undermine its affordable housing policy.
The council added that the site, given its position to local shops, public transport and local facilities, plus its character, made it ideal for low-cost housing.
Currently it includes the garage with sales and servicing areas, lock-up garages, a bungalow, and a former agricultural engineering workshop.
Cala's plan comprised seven one-bedroomed and 34 two-bedroomed flats in two and three-storey blocks with parking for 39 cars.
Several objections were raised by local residents on the grounds of over-development of the site, congestion, and infringing the amenities of neighbours.
The district council took the view that, with suitable conditions, the proposals could be acceptable in respect of these concerns, but that more provision for the affordable housing was needed along with additional recreational and play space.
As part of the appeal, Cala said it would address the price issue and play space. The council was still not satisfied on the undertaking for affordable housing.
Cllr Carole Topple, responsible for corporate planning on Cotswold District Council, said: "This is an important decision as it's the first appeal we have defended on these grounds. We are very pleased the inspector has endorsed our policy."
Cala Homes (Midlands) managing director Alan Brown said: "We are naturally disappointed at the inspector's decision. The site in Station Road, Moreton-in-Marsh, is ripe for regeneration and redevelopment and is already allocated for housing."
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