Plans to build 140 homes in the village of Barkway have been met with concerns from residents and the parish council, who fear the impact on the River Quin.
Barkway is the source of the River Quin, which is a rare chalk stream. There are only 200 chalk streams in the world, most of which are found in the south of England.
The development, known as BK3, would see a further 140 homes built, with 24 already having been built as part of the BK2 development.
A statement from Barkway Parish Council said: "Sadly, the Quin is in a sorry state, having been categorised as being in a poor condition by the Environment Agency every year since 2013 and, in some respects, the situation is continuing to worsen.
"The overflow of untreated sewage from Barkway Sewage Treatment Works [STW], together with over abstraction, has brought about this deterioration."
National BBC analysis has shown that seven water companies across England and Wales discharged untreated sewage into seas and rivers more than 3,000 times between 2017 and 2021.
The parish council is concerned that the increase in the number of houses in Barkway would turn sewage in the river Quin from a "problem" to an "ecological catastrophe".
They said: "The outlook for the River Quin and the ecosystem dependant on it is dire if no action is taken: there are no plans to improve the capacity of the STW nor upgrade its efficiency.
"Additional housing already under construction will further increase the problems at the STW and should the proposed BK3 housing development go ahead, it is difficult to see how a major collapse in the efficacy of the waste water treatment works could be avoided, leading to a catastrophic and irreversible loss of our rare chalk stream and its dependant flora and fauna."
In order to restore the river to its former state, Barkway Parish Council proposes suspending the development until issues are resolved with the sewage treatment works, and for the Quin to be assessed so it can undergo a recovery programme.
A spokeswoman for North Herts Council said: "This is a live planning application which will be considered by the planning committee and at this stage it would not be appropriate for the council to comment further."
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