Nailsea Town Council has made a formal complaint regarding the appropriation of the land known as The Uplands, saying the decision is 'fundamentally flawed'.
The town council laid out its reasons in a letter sent to Jo Walker, chief executive of North Somerset Council, and MP Dr Liam Fox last month.
In July, North Somerset agreed to take forward development on council-owned land to the south of The Uplands.
A commissioning plan for the procurement of a development partner to deliver 52 sustainable homes at the site was also agreed.
Nailsea Town Council said: "This development is not a public building or a statutory facility like a school being built on public open space.
"This is a commercial residential housing development. Which means this is about profit and therefore there is financial motivation.
"North Somerset Council owns the public open space, it is the developer, the client, the planning authority and appropriator of the public open space and it will be commercially selling residential housing on the site for financial profit.
"It is the town council’s view that there is a great deal of financial motivation here, not to mention a huge and very public conflict of interest."
The town council is considering its options for further action with regard to the appropriation of The Uplands.
A North Somerset Council spokesman said: "North Somerset Council was sorry to receive the complaint from Nailsea Town Council. A detailed response will be sent to the town council shortly.
"In bringing forward The Uplands for development, North Somerset Council is seeking to provide more and better housing for local people.
"The proposals have been designed by the Stirling Prize winning architects, Mikhail Riches, and will be an exemplar for sustainability, with all homes meeting Passivhaus standards. At least 30 per cent of the homes will be affordable and we will also be providing extra homes that are accessible or adaptable for those with mobility issues.
"The appropriation of The Uplands was not a decision that was taken lightly, but the proposed development will bring significant benefits for the wider community.
"North Somerset Council has met and exceeded legal requirements throughout the appropriation process and has provided detailed reports setting out its consideration of all comments."
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