Up to £200 million worth of development is being held back in Edenderry, Co Offaly, by repeated objections by the Eastern Regional Fisheries Board, property developers have claimed.
The fisheries board has successfully appealed a number of housing developments to An Bord Pleanβla, citing the town's inadequate sewage treatment plant as the main reason.
An estimated 1,500 houses are currently in limbo as a result of the planning logjam, and some developers are considering withdrawing from the town.
Edenderry is 38 miles from Dublin and its proximity to the capital has resulted in a surge of private housing construction in the last three years.
However, Offaly County Council was fined twice in the past two years for allowing deleterious matter to flow from the Edenderry waste-water treatment plant into the Weaver's stream, a tributary of the river Boyne.
The fisheries board contends the treatment plant is not adequate to meet the town's existing needs and is already 10 per cent over capacity.
Mr Tom O'Connell, a local auctioneer and developer and chairman of the Edenderry Town Commission, said the planning delays were an indictment of Government policy.
"We were told in January that Edenderry was going to be one of the places for a serviced land initiative so we could have 3,000 houses here, but the fisheries board are saying we can't have any more development at all," he said.
"The development of the town is being held back by this and it's up to the county council to get the sewerage upgraded so it has enough capacity for the town."
Offaly County Council disputed some of the fisheries board claims and said the upgrade of the treatment plant was adequate for phased development.
"The present upgrading works give a very significant breathing space," said Mr Michael Roche, the council's area manager. He said all 1,500 houses would not be built in one year, and the increased capacity of the treatment plant would facilitate construction of the houses in phases.
Mr O'Connell fears no additional construction can take place for another five years.