A derelict fuel depot site in Oxford could be turned into 78 homes under new plans.

The land off Railway Lane in Littlemore, which has lain empty for years, would be transformed into a new housing estate under the proposals.

Landowner W E Black Ltd wants to build a range of properties, from one to five bedrooms, and 126 parking spaces at the site.

But the Buckinghamshire-based developer said it could only afford to provide 25 per cent affordable housing rather than Oxford City Council’s set figure of 50 per cent.

The idea was last night welcomed, though there were concerns about the level of affordable housing.

Littlemore parish councillor Dorian Hancock said: “The building of houses has stopped for so many years.

“I think the council is correct to get the most affordable housing it can.

“However, as with all these issues it’s very much a barter off and the city council needs to be realistic and so does the landowner.

“After all, a builder won’t build if he’s going to make a loss.”

City councillor for Littlemore John Tanner said: “I’m thrilled somebody wants to develop this derelict site.

“We badly need homes in Littlemore, but what we particularly need is homes for people on lower incomes. So I think we will be pressing for the full 50 per cent of affordable homes.”

The land, which is bordered by a railway line and Heyford Hill Sainsbury’s supermarket, was sold to W E Black by BP at the peak of the market in 2003 for £3.5m.

The firm also bought land at Station House from a private owner for £350,000 and a further slice of land from Network Rail for £205,000 to complete the development site.

A report prepared by estate agents Savills said the value of the site had dropped significantly since 2003 and that had affected the viability of the scheme. It said: “The appraisals undertaken have identified that the site is not viable based upon council policy position.

“The site is viable with a 25 per cent affordable housing position, providing an 80:20 split between social rented and shared ownership tenure.”

The report added that in today’s market the land was valued at £2.445m.

A planning application was submitted in 2004 for 115 homes.

That was refused the following year over fears of overdevelopment, lack of open space and car parking.

The latest proposal for the four acre site is expected to go before Oxford City Council’s planning committee in the next few months.

If approved, work could start on site in December 2012 and is expected to be completed by May 2016.

No one from W E Black was available for comment.