New homes in the heart of Oxford will form "an integral part" of the new £300m Westgate Shopping Centre, developers promised this week.

With a planning application to be submitted next month, the Westgate Partnership announced that it is working with the Bromford Housing Group to create 120 homes within the massive retail scheme.

Developers say that they have responded to calls to include more housing in the development, with half the new homes to be "affordable".

But they face further opposition to plans to demolish 18 council homes for disabled and elderly occupants, with a councillor accusing developers of holding Oxford City Council to ransom.

Green city and county councillor Sushila Dhall said residents were distressed at the prospect of losing their homes in Abbey Place. The Carfax ward councillor said: "The developers are saying the whole scheme depends on demolishing the Abbey Place council housing. The housing was built with special facilities and to provide easy accessibility to the city centre.

"These are the most vulnerable people in my ward and they should be protected. You cannot just move residents with disabilities anywhere. I think the developers are holding the city council to ransom, with the threat that if they can't demolish the houses, they will have to withdraw. A fall back position is needed if the demolition is not allowed."

Abbey Place carer Christian Patterson said: "People living here want to stay in the area. They moved here because they wanted easy access to city centre facilities. But there are still no proposals to build flats for the disabled in this development. Residents feel they're being pushed out."

Jane McFarland, group development manager for the Westgate Partnership, said her company was working with Bromford Housing and the city council to ensure the affordable housing met local needs, including "adaptation for those with special needs, if required".

She said: "Providing new housing is an important part of our proposals for Westgate. One of the key areas of feedback we received on the masterplan proposals was the need to provide more city centre accommodation, as a result of which we increased the total number of units, both affordable and those for private sale."