Councillors have approved plans to replace 25 permanent residential caravans at the Old Sawmill in Gargrave with 12 new homes.
The scheme on Marton Road will also see the former sawmill building converted into two apartments.
As the site is in a flood risk area next to the River Aire, a final decision will be made by the secretary of state for housing.
Two previous applications were refused by the former Craven District Council due to flooding concerns.
The latest application, submitted by Rebecca Hall, was also recommended for refusal by officers due to their view that the site could have potential for flooding.
However, Gargrave councillor Simon Myers addressed Skipton and Ripon’s planning committee to say the Environment Agency had recently revised the flood risk map for the area, leading him to believe the site was safe.
He said residents and the local parish council were in favour of the scheme, which had “been on the books for far too long”.
The applicant submitted a flood risk assessment from consultants at AECOM which concluded most of the site is not at risk of flooding.
Cllr Myers said: “Anecdotately this site has never flooded. There are other sites in the village which the planning authority has approved which do flood. At the end of the day, it’s an underused unattractive residential site that would benefit from a very good scheme.”
Cllr Robert Heseltine (Conservative and Independents, Skipton East & South) said he was satisfied the land was safe from flooding, adding “nobody has seen any caravans floating down the River Aire”.
Cllr Andy Brown (Green Party, Aire Valley) said he also supported the scheme as it would improve the village’s appearance. He added: “There are people living there at the moment and without being rude to those residents it’s not the most pretty situation in the world. This improves it significantly.”
Committee chair Cllr Nathan Hull (Conservative, Washburn & Birstwith) said it would be “sensible” to approve the plans and give the final say to the secretary of state who will examine the potential for flooding in detail.
He added: “Saying the site has never flooded in the past is no guarantee that it won’t flood in the future, particularly with the state of the environment at the moment.”
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