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The Joseph Rowntree Housing Trust (JRHT) is to proceed with the development of a pair of eco-friendly prototype properties in Derwenthorpe.
Work is going ahead on the site despite calls from the parish council to freeze construction pending an investigation from the European Commission.
The council stated that the work could not continue until the land deal drawn up between the trust and the City of York Council had been examined and that there was no reason to continue with the prototypes without the rest of the Derwenthorpe scheme.
However, John Hocking, executive director of JRHT, said that all applications for planning and development work had gone through the correct channels.
"These properties will enable us to gain an understanding of how to design and build sustainable (environmentally friendly) housing and housing for families with disabled children," he said.
The Homes and Communities Agency has unveiled details of almost £200 million it is to be allocated by the government to develop new and energy-saving housing, the Green Building Press reported.
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