The authority had originally granted permission for the building of the two blocks on a site in Court Street despite the plans not including any affordable housing or contributions to local services.
During the recent planning meeting in which the permission was granted off of the strength of chairman Cllr Alan Boad’s (Lib Dem, Leamington Lillington) casting vote after the committee was split in its vote whether to approve the plans.
At the meeting Councillors Colin Quinney (Labour) and Ian Davison (Green), who are committee members, argued strongly against the process and there has since been uproar in the community with residents fearing the flats would be ‘pokey student accommodation’.
But the councillors have now confirmed the authority has decided not to sell the land, which it owns, to the developer.
Cllr Davison said: “This is great news for residents and current occupants like Action 21
“It may enable a much higher quality scheme to be developed in the Court Street area that protects employment and provides affordable housing, as our Local Plan requires.”
Both Councillors have asked for an urgent review into the original decision.
Cllr Quinney said: “National guidance states that viability assessments should be tabled at the start of the process.
"Why doesn't the council insist on this?"
"Guidance also states that a developer cannot escape planning obligations simply by claiming higher risks or lower profits.
"Exceptional circumstances have to be proved.
"Why, again, was that guidance not followed in this case?”
“Worse, why were councillors and the public kept in the dark until the day of the meeting?
"Public confidence has been damaged.
"We need reassurance that policy and processes will be tightened up to avoid this or something similar happening again.”
Warwick and Leamington MP Matt Western was also opposed to the plans, pointing out that similar plans were shelved in 2016 despite 40 per cent of the houses beign affordable .
He said: “ “This is an embarrassing U-turn for the council and, unfortunately, it is not the first time we’ve seen a volte face over developments without affordable housing.
“The ill-fated Riverside House council offices plan also went against the council’s own policy for the number of affordable homes – and has cost the taxpayer a great deal despite its failure.
“We must have social rent, council, well insulated and net-zero housing to tackle the housing crisis.
“If we don’t, it is only highly profitable developers – and not their tenants - who reap the benefits.”
The proposed blocks would have been built over the current site of Action 21’s shop, which recycles second-hand goods including bicycles, as well as several other long-standing businesses and would require them to find alternative locations.
The charity’s chair of trustees Belinda Pyke fears it will be very difficult to find a new home.
A spokeswoman for Warwick District Council said: “We can confirm that a letter was sent to the applicant for the planning permission – who is also the lessee of the site owned by the council - on Monday May 23.
"The letter confirmed that Warwick District Council has no immediate or long-term intention of selling its freehold to this site.
"In addition, that the Council will not provide consent for the proposed development in its capacity as owner of the land.
However, in terms of planning, the resolution to grant planning permission by the planning committee has not changed.