Shropshire Council had previously adjourned and then refused permission for the multi-million pound development but the application was back on the table on Monday after developers threatened to appeal to the Planning Inspectorate unless permission was granted this month.
Planning councillors voted 6-4 to grant permission for the new community which will also see a school, business premises, and health, community and leisure facilities built on the 350-acre site at Buildwas.
The developer's original plans had been rejected in August due to concerns over the lack of affordable housing, the impact on local roads and the absence of a firm agreement on plans for a new GP surgery.
Ordinarily developers have to appeal planning refusals or submit new applications following a rejection, however the Harworth Group was given the chance to submit amended proposals after lodging a legal challenge on a procedural issue regarding the August rejection.
Harworth increased the proportion of affordable housing in the plans from five per cent to 10 per cent - the equivalent of 100 homes but still below the council's usual required amount of 20 per cent.
The developer also agreed to pay the full £913,750 requested by Shropshire Clinical Commissioning Group (CCG) for a new medical centre.
Tracy Darke, assistant director of economy and place for Shropshire Council, said: “This will provide jobs and homes for our children and our grandchildren."
She said officers had moved “heaven and earth” to meet the wishes of the Shropshire Clinical Commissioning Group to keep its options open over providing health services for the new homes.
“The CCG came late to the table and we would prefer to see the health facilities on site,” she said.
Speaking for Harworth Group, Stuart Ashton, it had been working on increasing the number of affordable housing on site.
“Harworth is one of only two companies that would have taken the financial risk to act as a developer on the site and we want to get it right.”
Identical plans had been submitted to both Shropshire and Telford and Wrekin councils, but with the vast majority of the land in Shropshire Council's boundary, Telford and Wrekin delegated any further negotiations to Shropshire to approve.
Councillors heard from several objectors including local resident, Simon Heath who lives on the A4380, before the plans were approved.
He said there were already accidents, the latest one only last week, and said the number of crashes would only rise with the traffic that would be generated from the new development.
“The Buildwas junction is already not a place you would want to cross the road to take your six-year-old child to school as we have to,” he said.
Councillor Andy Boddington said that while there were huge pressures on the committee to grant permission, including the threat of an expensive appeal, that did not absolve councillors from making the right decision.
He said: “We need a social mix and sustainable transport for this site.”
The last major structure at the power station was blown up earlier this month, two years after the landmark cooling towers were brought down in 2019.
The power station has dominated the landscape since the 1960s but stopped operating in December 2015.
Councillor Caroline Bagnall, who represents Broseley, said she was disappointed with the decision.
"It is disappointing, but not surprising," she said as soon as the meeting broke, "in as much as if we have a policy to have 20 per cent of new developments as affordable homes, I think we should stick to it.
"Now we need to make sure that it proceeds in the best possible way, and hope that it creates jobs for local people."
During the meeting several members of town and parish councils had their say on the issue.
Councillor Sue Jones, chair of Leighton Parish Council, said that traffic calming measures in the plan are not sufficient.
"There will be the sand and gravel extraction has to carry on before the building of any housing. We need the help, the extra funding for extra traffic calming now to mitigate the current traffic problems and that that will come from construction traffic," she added.
Lorraine Pratt, of Buildwas Parish Council, echoed Councillor Jones' comments: "We recognise that more has now been promised for health and affordable housing but it does not go far enough.
"It does not address the concerns of people living here who do not want 1,000 homes on their doorstep. It will have a devastating affect on our community," she said.
Councillor Duncan White, of Much Wenlock Town Council, said that they would be looking at a legal challenge should the plans go through.
He told the meeting: "We were relieved that Shropshire Council refused the application, but instead of a refusal notice issued, this was brought back to councillors for the third time. It is democracy being kicked into touch."