The Association of Black Country Authorities (ABCA), made up of Dudley, Walsall, Wolverhampton, and Sandwell councils, has been calling on Shropshire to take on more homes as part of its local plan.
The local plan sets out sites across Shropshire where a combined 30,800 homes would be built up until 2038.
The plan is currently being assessed by planning inspectors to decide whether it is considered 'sound', and can proceed without changes.
Within the plan Shropshire has offered to provide 1,500 homes for the ABCA councils, to help them meet their own housing targets – but the offer has been challenged by ABCA, which wants space for more housing in Shropshire – as well as space for business development.
The issue is due to be discussed at a special hearing of planning inspectors in the new year, to evaluate whether Shropshire has met its 'duty to co-operate' requirements.
In a letter to planning inspectors as part of the hearings, Walsall Council specifically called for plans from the Bradford Estates, for 3,000 homes and business development on land to the west of Tong and north of Junction 3 of the M54, to be allowed to go ahead.
Shropshire Council had decided not to include the controversial proposal in its local plan.
Representatives from the Bradford Estates have also been part of planning hearings, questioning whether Shropshire has done enough to help the Black Country councils with their housing problems.
The January hearing could be crucial in deciding whether the Bradford Estates proposal can go ahead.
Now though problems have emerged with the Black Country Local Plan – being created by the four ABCA councils – with Dudley shocking other members by announcing its plans to pull out.
The plan was to set out where 76,000 new homes would be built across the four boroughs by 2039.
Dudley Council, which wished to remove two controversial sites from the plan, has said it will now create its own plan, with its leader Patrick Harley, saying he could not allow public feedback to be ignored.
He said: “At every stage of this plan we have made it clear that it must be led by the people who live here.
“I simply cannot stand by and allow decisions to be made which are contrary to the overwhelming feedback we have already received.
“This is clearly a very emotive subject and people feel very strongly about it. I must reflect that in the decisions I make for the people of this borough.
“We will therefore look to go it alone and look at what is needed to support a Dudley-specific plan and setting out the timescales for that."
Responding, Walsall Council leader, Councillor Mike Bird, said he was "surprised" at the development, while Wolverhampton Council leader, Councillor Ian Brookfield, said he was "disappointed".