OXFORD City Council has said it will lose out on funds to build hundreds of new council houses after inspectors told it to scrap a key planning policy.

The authority claimed it will now miss out on up to £42 million after it was told it cannot force developers who build between four and nine homes to contribute to public funds.

It wanted to continue to force companies to pay 15 per cent of the homes’ sale price into a council house fund, but the inspectors said it was ‘evident’ the council’s policy had only affected a ‘very small number of sites’ and ‘has not yet directly led to the provision of new affordable homes’.

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The authority said the policy had already generated £1.4m from just four developments.

None of that cash has actually been handed over to the council yet, but it will not be affected by the inspectors' ruling.

One critic of the council, a housing expert who works in Oxford, said the policy was a ‘deliberate departure’ from recently adopted national policy and had discouraged development.

They continued: “Not only has the council had virtually no contributions for affordable housing from these sites since introduction of the policy in 2013, such developments have been deterred almost completely.

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“The loss to housing supply within the city is considerable.”

The council said that was a common view among developers.

Alex Hollingsworth, the city council’s cabinet member for planning, said the move would mean ‘hundreds of families will have to wait longer than they otherwise would have done for a home of their own'.

He said the change to national policy was ‘utterly frustrating and hugely disappointing’.

The council said its leader, Susan Brown, will ask the housing, communities and local government secretary Robert Jenrick for special dispensation.

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The authority said the building of 25 homes on four sites will eventually bring in the £1.4m – once each development has been sold.

Those developments are a six-home estate on Between Towns Road; nine on Garsington Road; six on Aristotle Lane in North Oxford and four on High Street.

Other developers had argued successfully that their project would have been unviable had they needed to contribute 15 per cent of their sale to the council.

One case included an application for six flats in Sunderland Avenue in North Oxford.

The policy would have been included in the council’s Local Plan.

That is likely to be adopted sometime next year.