Willmott Dixon can now start construction later this year on 393 homes in the first phase of the wider 5,000-home town in Bicester, Oxfordshire.

The cost of delivering the housing element will be in the region of £80m, although the project also includes a school and an Eco Business Centre.

Cherwell District Council gave developer P3Eco and housing association A2Dominion the planning go-head last August but had to agreed final details of the mixed-use zero carbon village.

The decision unlocks £6m in Homes and Communities Agency funding needed to help deliver 119 affordable homes as part of this phase of development.

NW Bicester Eco Development will be one of the biggest housing developments constructed to Level 5 of the Code for Sustainable Homes in the UK so far.

This exceeds the new standards set by the Government for housing in the designated eco-towns.

Each house will have high standards of water efficiency, exceptional levels of insulation in walls, windows and roofs and make use of photovoltaic panels and district heating systems.

Tim Carpenter, managing director of Willmott Dixon, said: “The whole housing industry will be watching and learning from this exciting project as we work with A2Dominion Group to develop sustainable homes that will help set a standard for how future housing can meet our carbon reduction commitments.

Bicester was one of several locations chosen by the previous Labour Government to become eco-towns in 2009, with promises of government money to help build infrastructure.

The idea was to create zero-carbon developments, with 30% affordable housing and a minimum of 40% open space.

But  the coalition withdrew funding for the scheme and allowed local authorities to decide if they wanted to continue with them if they had public support.