Ambitious plans for a new 700-home “urban village” in Birmingham are to be submitted by the end of the year, according to the NHS Trust behind the scheme – but the project is already facing opposition from councillors.

University Hospital Birmingham NHS Trust is pressing ahead with a major housing scheme on the site of Selly Oak Hospital and intends to submit its outline planning application to Birmingham City Council by the end of this year.

The Trust, which runs Queen Elizabeth Hospital in Edgbaston, could either sell the 17.2-hectare site once planning permission has been obtained, or manage it in partnership with developers.

But it is pressing ahead with the urban village proposal despite opposition from councillors, who wanted the land used for employment instead.

Bournville councillor Nigel Dawkins (Con) has been pushing for the land to be used for high-value industry, in line with the council’s A38 Technology Corridor proposals.

However, the Trust’s proposals have won a cautious welcome from local MP Steve McCabe (Lab Selly Oak), who praised “the imaginative and inclusive approach” it has adopted but called for continued consultation with residents.

Money raised will be invested back into the Trust, and may be used to develop a new research centre on the site of the old Queen Elizabeth Hospital in Edgbaston, which is no longer used following the construction of a new £545 million facility nearby.

According to the Trust, outline planning application will assume a maximum of 700 units, including those provided within any retained buildings that are developed. It hopes to receive outline planning consent by spring 2012.

The Trust is promising a mixture of family homes and smaller properties, including homes for first-time buyers. The aim is to create an urban village in which people can aim to move up the property ladder.

As part of the commitment to create an environmentally-friendly development, the Trust is working with an arboriculturist to ensure many of the trees on the site are preserved.