Tenby's former Cottage Hospital site has been earmarked for a housing allocation.
Pembrokeshire Coast National Park Authority has identified the Trafalgar Road side as a possible location for 10 residential units.
The now derelict land is one of the proposal sites outlined in the authority's draft Local Development Plan which also seeks to use it to accommodate an identified need for affordable housing.
The authority is now asking for comments on the proposals which should be submitted to the authority by Wednesday, April 22.
The news, however, has already been given a 'cautious welcome' by County Councillor and National Park member Michael Williams.
"My concern is that the site will be developed for the benefit of people from outside the area," he said.
"It should be clearly identified for low cost housing for local people. Not social housing, but for local first time buyers."
He continued: "In excess of 40 per cent of properties within the town walls are now second homes. This site must be used for the benefit of local people, allowing them to live in the town.
"Second homes are a curse in Tenby, bringing almost no benefit to the area.
"What chance have businesses if so few live in the town?" he asked.
"It's high time the county council put local Tenby people first."
National park planning officer Sarah Middleton said: "We're preparing a new plan which will guide the planning decisions made in the future. The draft or 'Deposit' plan we've drawn up after our initial consultation process gives you the chance to tell us whether you think we've got it right."
The plan contains policies to guide where development should and shouldn't happen up until 2021. Parcels of land are allocated for developments of housing, including affordable housing, business and other community uses.
It also highlights areas that should be protected from development, such as open spaces, 'green wedges', countryside and coastline.
The cottage hospital site is one of a number of areas identified for proposed housing in the town.
Others (with estimate number of housing units in brackets) include Brynhir - 168; Rectory car park - 50; land west of Narberth Road - 25; and Butts Field car park - 80.
Together, the proposals for Tenby could result in an extra 345 housing units for the town, while elsewhere, there are proposals for Jameston, Manorbier, Summerhill, Lawrenny, and New Hedges, with 30 units suggested on land at the rear of Cross Park.
There's also a number of mixed use proposals, including in Tenby at Upper Park Road, White Lion Street and Deer Park and Sergeant's Lane, while in Saundersfoot, the rear of the Cambrian Hotel, which already has planning permission for redevelopment.
Footnote: Copies of the documents are also available for public inspection free of charge at the National Park Head Office at Llanion Park, Pembroke Dock, or at the following libraries during their normal opening hours: Cardigan, Hakin, Newport, Crymych, Haverfordwest, Neyland, Fishguard, Milford Haven, Pembroke, Goodwick, Narberth, Tenby, Pembroke Dock, St. Davids, Saundersfoot, St. Clears.
Representations (including objections) in respect of the deposit plan, should be sent in writing to the Head of Development Plans, Pembrokeshire Coast National Park Authority, Llanion Park, Pembroke Dock, Pembrokeshire, SA72 6DY, or sent by email to [email protected]">[email protected] before 5 pm on Wednesday, April 22.