Councillors had previously approved a deal which would have seen them pay Muir Housing Group a grant of £250,000 to build the facility, on the corner of St David's Road North and Heeley Road.

The authority passed up an offer of £310,000 from Town Manor Developments to build affordable housing on the site.

But faced with a substantially increased offer of £400,000 Fylde Borough's cabinet finally relented and sold the land to the property firm.

Coun Roger Small, cabinet member for corporate resources and finance, said: "The amount of money Town Manor offered was very impressive and it could have been seen as irresponsible of us to turn it down."

Plans to build the facility caused uproar when they were first revealed almost two years ago.

The deal with Town Manor was criticised because the grant given to the group would have been used to pay back the Council for the land - making it effectively free.

Members of the Heeley Road Hostel group, formed to fight the proposals, had been encouraging the Council to take up Town Manor's offer and were jubilant at the news.

Chairman Bob Dagnall said: "It has been an anxious time for local residents. We know of people suffering with their nerves because of the Council's plans. This will be a weight off their shoulders."

He also thanked the councillors who opposed the scheme and said that the sale represented a victory for community.

Despite scrapping the Heeley Road facility, the Council says it will not ditch the Muir Housing scheme completely and would look for an alternative site for accommodation for the homeless.

Coun Patricia Fieldhouse, cabinet member for social wellbeing, said: "We still have a duty to provide accommodation to people who find themselves homeless. We will now have to look at alternative sites and come to arrangement whereby the scheme can still be developed."