Developers have submitted plans to build dozens of new homes on the site of the former Wharfedale Hospital.
The proposals could see up to 61 properties – made up of new homes and the converting of listed buildings – at the site in Otley.
The former hospital buildings will be refurbished and converted to provide a mix of 35 apartments and townhouses.
Around 26 new homes will be built but there are fears only three of them will be affordable properties.
Under the proposals the chimney on the site will be retained along with the mortuary building.
Otley Town Council have objected to the scheme claiming that there is a lack of provision of affordable housing.
Local councillors said that although they support redevelopment of the former hospital they object to the lack of affordable housing.
The scheme was granted permission over two years ago but the relevant section 106 agreements were not completed.
A report to Leeds City Council’s south and west plans panel said: “The decision to build a new hospital adjacent to the site a number of years ago means that the existing buildings on the site are no longer required or suitable for hospital use.
“It is considered that conversion for residential purposes would be the most appropriate alternative use.
“This application represents an important opportunity to restore and secure the future use of the historic buildings on the site.”
The report acknowledges that the number of affordable homes is “very far short” of policy.
But adds: “Officers are satisfied however the three dwellings provided fairly represent what this scheme can viably support and that an exception to policy can therefore be justified.”