More than 100 people living at a West Sussex caravan park have threatened to use a £1.5 million "war chest" to battle development there.

Golden Sands residents crammed into Adur Civic Centre to oppose moves to transform the six-acre Lancing site into affordable housing.

Christopher Jones, chairman of the Golden Sands residents' association, said members would activate their insurances' legal cover to fight any development plans.

Adur District Council's community services committee was to decide on whether to build on Golden Sands but agreed to defer the matter until March for more information.

Mr Jones said: "I think it is immoral. When we bought our caravans, we were told Golden Sands was only used as a caravan site and had covenants covering that.

"If we knew there was going to be housing on it, we would not have spent tens of thousands of pounds on our caravans.

"Golden Sands generates a great deal of money. If the council did apply for planning permission, a conservative estimate would be four years to get everything in place. All this time it could be making £118,000 a year.

"From four years, the council would have lost £500,000 in revenue."

Peter Latham, the district's corporate director of environment, community and housing services, said Adur needed to build 500 affordable homes and the £70,000 estimated cost of repairing the park's crumbling cesspits had proved too expensive.

He hoped costly legal debates could be avoided but said: "We never promised homes for life on this site."

The Environment Agency had been concerned about the proposed development because the park was prone to flooding, despite plans for more sea defences.

In a written statement, an agency spokeswoman said: "Even when these defences are completed, if there is an extreme flood event the caravan park will still be vulnerable to deep flooding up to a depth of three metres in a very short space of time."

Eric Williams, of Friends of Widewater Lagoon, said: "Golden Sands sits on a flood plain.

"You can put caravans and prefab buildings on it but the moment you start putting real buildings on there it will sink into nothing.

"It should never be considered for development."

Council officers were asked to investigate whether homes could be built on the site and to carry out a public consultation exercise.

Last night's decision means Golden Sands will be open at least until 2005.