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The application to build 14 new homes behind the Royal Oak pub in Newport received conditional approval from National Park planners on Wednesday, subject to the properties housing local people.
Councillor John Allen-Mirehouse told the committee: "The people of Newport should have priority for these houses."
However, David Prescott, solicitor for the National Park, reminded members that homes allocation was based on a points system and should someone from Cardiff have a higher points score than a local resident, there was little the authority could do to ensure the home did not go to those from outside the locality.
The controversial plan also sees the 0.4 hectare plot, currently designated an open space for the community, developed for housing, contrary to the authority's Local Plan.
Local residents raised four objections to the development, citing the proximity of the new homes to the existing ones and the loss of car parking for current residents as well as those of access and the loss of amenity land.
The application will see the demolition of 50 and 51 Maes Ingli to improve access to the site although 51 will be rebuilt in a revised position as part of the development.
Should the development not be used for people from the town the application will be referred back to the authority and then on to the National Assembly.
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