DEVELOPERS claim a new social housing charge could halt the building of student accommodation in Oxford and have launched a legal bid against it.

Oxford’s two universities looked to have admitted defeat on a council policy which could force them to hand over millions of pounds towards social housing.

But Merton College, along with developer McLaren Property Ltd, has now lodged a late legal challenge.

The city council’s Sites and Housing Plan, setting out where homes should be built over the next 13 years, was approved by a Government inspector in January.

However, Merton was one of a number of Oxford colleges to complain the proposed charge amounts to “an unauthorised housing tax”.

The new legal challenge will centre on a development at Manor Place, a central Oxford site where Merton wants to build accommodation for 298 students in three and four-storey blocks. Merton says the scheme is now unviable because of the council’s proposed policy, which would add to the cost of student accommodation by means of a charge of £140 per square metre, plus a five per cent administration charge. Previously there was no charge.

It is understood that the new charge will add £1m to the cost of the Manor Place scheme.

Oxford Brookes University earlier said that for a scheme the size of the 313-bed Dorset House development now open in London Road it would have meant handing over £1.37m towards affordable housing.

The policy was part of the city’s Sites and Housing Development Plan, which went to an examination in public last year.

The council proposed the social housing charge in December 2011.

McLaren is a London-based company that specialises in student accommodation and is behind the Merton development.

Merton and McLaren are also challenging an element of the Sites and Housing Plan that says all self-contained student flats, the sort usually built for postgraduates, should be treated as residential accommodation rather than student accommodation.

This would require colleges and universities to provide 50 per cent affordable housing when building postgrad flats and, say Merton and McLaren, make all such developments unviable.

A joint statement from Merton and McLaren said: “This legal process is now the only possible method of challenge available to us of a policy which will have the effect of making the development at Manor Place unviable.

“The impact of the policy does not solely affect Manor Place, but will have a wider implication across other potential development sites in the city.”

Stuart Black, of McLaren, said: “The plan would stop dead student accommodation in Oxford that is done on a commercial basis.”

A spokesman for Merton said: “The college thinks the inspector has incorrectly addressed several issues.”

The Sites and Housing Plan was adopted by the council in February.

City council spokesman Chris Lee said: “We will continue to defend the adoption of these policies as fair and appropriate.”

Colin Cook, city council board member for city development, said the council wanted to remove the financial advantage of building student accommodation instead of new homes.

And he said this element of the Sites and Housing Plan was introduced to try to stop a loophole that sees developers getting permission for student flats which would later be sold or rented as private homes.

McLaren says it has lodged papers with the High Court in London.