Shetland Islands Council has submitted a planning application to build 72 homes at Hoofields, at the outskirts of Lerwick.
The council’s housing department is also preparing tenders for the sizeable development so that construction could go ahead without much delay, should planning permission be granted.
The investment, estimated to be in the region of £7 million, is part of a £20 million council programme to ease the shortage of affordable housing in the isles.
However, the Hoofields development will not create 72 additional houses as part of it is to replace the existing 32 chalets.
Head of housing, Chris Medley, said roads and services will have to be put in place before the first houses can be built.
The plan then is to gradually move residents into their new homes before the chalets can be decanted.
The planning application is not connected to news earlier this week that SLAP had bought 70 acres of land at the north end of Lerwick.
Meanwhile, it has emerged that Hjaltland Housing Association (HHA) has lost its appeal against a planning board decision not to allow a housing development of 38 houses and flats at Veensgarth.
Government reporter Richard Hickman ruled that the proposed development should be rejected because it was too far away from basic services, such as Tingwall primary school.
It should instead be proposed for Strand, about a mile away, where land was zoned for housing.
The council’s planning board had originally refused permission because the houses would have been built on good agricultural land.
Services manager Bryan Leask said the housing association had won the argument over the agricultural land, but then the reporter made his decision on the issue on the location of basic services that had previously not been raised.
“If we had thought this would be an issue, we would have looked at this. Planners also had no concern,” he said.
HHA has been in the process of looking at building houses at Strand for some time, he said, and would now review this in light of the Veensgarth decision.
He said he regretted that the 38 desperately needed houses were now not to be built, but added that Hjaltland had planning permission to built 10 new units at Herrislea House Hotel, also in Veensgarth, by converting part of the hotel into flats and also build some houses on the grounds.
He added that building six houses at Cullivoe, in Yell, would get under way shortly, thanks to the existing bridging loan facility with Shetland Islands Council.
Earlier this month, the government announced that it supported the scheme with a grant of £761,000. However, it has now emerged that this money will not be available before 2012.
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