Oxford University is to cut back on its plan to extend Wolvercote to create new homes for its staff.

The university had planned to create 200 homes for employees in a £40m scheme on the edge of the city.

It hoped building could coincide with the £30m scheme to replace the Wolvercote viaduct on the A34, now under way.

But the plans are being reviewed in a bid to reduce the costs, after problems emerged over developing the former Wolvercote Paper Mill site.

University land agent Tim del Nevo said: "The original scheme we came up with has proved too expensive.

"We cannot afford to do it. It was just too many millions of pounds for what we were going to end up with.

"We tried to make it too special. It just didn’t stack up because we were dealing with an ex-industrial site, which is much more expensive than a greenfield site to build on."

The site includes a neglected reservoir and is bordered by Mill Stream, a tributary of the River Thames.

The university is now hoping to build 144 homes, with no planning application likely to come forward for at least another year.

Mr del Nevo said: "We’ll be looking to make savings across the board and to find solutions to cope with water on the site. But the scheme will still be high quality. The university does not intend to throw up something cheap and cheerful."

The university unveiled its plans for Wolvercote in late 2005. It said the scheme would address a housing shortage that made it increasingly difficult to attract and retain staff.

But the university's 'self help' plan was complicated by Oxford City Council's housing policy, demanding that at least half of all new dwellings built in the city should be used for social housing.

Seven acres of the 17-acre site lie within the Green Belt, with the rest designated brownfield. The land has been owned by Oxford University Press since the 1850s.

Peter Adams, chairman of the Wolvercote Commoners, said: "The village will welcome the fact there is to be a reduction in the proposed house numbers.

"Two hundred homes would have represented a massive expansion of Lower Wolvercote.

"The biggest fear has been the impact on services and the increased threat of flooding.

"Every time there has been flooding in the last two years the Environment Agency has had to revise its flood plan."

Mr Adams said if the scheme went ahead, the Commoners would press for affordable housing to be set aside for people from Wolvercote.