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Medway council has ejected housebuilder Crest Nicholson from the 拢300m Rochester Riverside regeneration scheme, after the council refused the housebuilder鈥檚 offer to re-start the development.

Housing association Hyde is now poised to do a deal with the council to build out the first 70 affordable homes for the scheme.

Crest was selected as preferred bidder for the 2,000-home development in January 2008, following a competition, by Medway council. However, it put the scheme on hold as the credit crunch hit, only re-starting talks a year ago. Crest鈥檚 group board director Chris Tinker said the firm offered to build out the first homes at a low profit level with the council sharing some of the sale risk. However, the council turned the offer down after Crest said the 32-ha council-owned site wasn鈥檛 worth anything, meaning the council wouldn鈥檛 make a land receipt from allowing development to progress.

The decision to work with Hyde Group over building some affordable homes comes despite Medway Council approving Crest鈥檚 detailed planning application for the first 161 homes last week.

Crest鈥檚 Tinker said: 鈥淒espite the economics of the development, Crest was prepared to commence development of both the open market and affordable housing components of the project in the spring and to share the associated risks with the Council. Whilst the commercial returns were sub optimum for all parties, it is to be regretted that this strategy was not ultimately acceptable to the Rochester Riverside Board.鈥�

The council鈥檚 cabinet is due to vote tomorrow on a proposal for Hyde to build the first three blocks, allowing construction start by September next year. Homes and Communities Agency funding of 拢4.6m is contingent upon work starting in 2011.

Cllr Rodney Chambers, leader of Medway Council, said: 鈥淩egrettably, in the current economic climate it has not been possible for the parties to agree mutually acceptable terms. It鈥檚 our public duty to secure a deal that maximises the future potential of Rochester Riverside, one of the most impressive regeneration sites in the south-east.鈥�

He added: 鈥淭he proposal we鈥檙e developing with Hyde means we could see construction start in September 2011. I鈥檓 delighted that we鈥檝e overcome the challenges of the current housing market to attract the interest of such an impressive developer.鈥�