Under a bright blue sky, the art lovers were flitting from the Tate to the Barbara Hepworth museum while the surfers jogged towards tempting sets of waves rolling on to Porthmeor Beach. The less energetic were happy to find tables in the cappuccino bars and gaze out at the sunlit harbour.

It is no wonder that even in November visitors flock to St Ives – nor that outsiders with money to spare are snapping up the pretty cottages, once inhabited by fishermen and artists, as second homes or to be used as holiday lets.

But now the resort’s ever-increasing popularity, and the consequent dearth of affordable homes for local people, has led the town council to float the drastic idea of banning new developments aimed at visitors or for use as second homes. Supporters claim such a move is necessary to make sure locals, especially the young, are not driven away by prohibitive house prices and rents; others claim the town’s economy has long been based on the spending money that visitors bring and anything that threatens the growth of tourism must be resisted.

“It’s a terrible idea,” said Colin Nicholls as he served a steady stream of second home owners shopping for DIY bits and pieces at his hardware store. “This is one of the most popular towns in the world. If people want to invest here, they should be encouraged to. Look how busy we are on a day in November. Go to another seaside town and it’ll be empty.”

Florist and grocer Bill Harvey agreed. “There used to be fishing here, there used to be agriculture. But those industries have gone now. We only really have tourism and we have to make sure we do nothing to damage it.”

Across at Bradleys estate agents, Jon Harvey, was fielding calls from investors keen for a piece of St Ives. He has just sold the artist Ben Nicholson’s home, Trezion, for £1m while not so long ago the company auctioned off three parking spaces for £160,000.

“Around 70% of property is sold as second homes or holiday lets,” he said. “It does make it difficult for local people to find a place to live but it’s all about market forces.”

At one of the surf shops on Fore Street, Eilaine O’Brien, who has lived in St Ives all her life, said something needed to be done to fight back against those market forces. “At some times of the year it does get quiet because there are no locals living here. That leads to a loss in community spirit. You need both – locals and visitors.”

Behind the till, her daughter, Louise, a 27-year-old mother-of-three, snorted at the idea of ever being able to afford her own house in St Ives.

She flicked through the Cornishman’s property pages and shook her head at the cost of a three-bedroomed house. “I’ll never be able to afford £500,000. I’d have to win the lottery.”

While prices rise, wages fail to keep pace. Statistics produced by Eurostat, the EU equivalent of the Office for National Statistics, claim the average wage in Cornwall is £14,300 a year compared with £23,300 across Britain. According to Cornwall council, a fifth of people of working age in the county earn below the living wage.

Louise from the surf shop has a council house but many others are not so fortunate.

There are just under 600 applicants with a St Ives connection on Cornwall council’s Homechoice register – its housing waiting list. Almost 1,000 people have put St Ives as their first preference for a home.

The town council’s ambitious scheme to address this will appear next week (week starting Nov 17) in the St Ives area draft neighbourhood development plan (NDP) – one of more than 1,000 such blueprints being prepared around the UK under the 2011 Localism Act. The policy suggests imposing a “full time principal residence requirement” on all new homes.

A community referendum will approve or reject the plan but such has been the outcry – with some local newspapers characterising it as a battle against the out-of-towners – that the council is now refusing to do interviews. It issued a statement in which it claimed it was trying to strike a “balance” that would be fair on visitors – and locals.

The issue is likely to be a hot one during the general election campaign.

Tim Andrewes, who is standing for the Green Party, said the council’s policy was the “logical response” to the crisis. Lib Dem and sitting MP Andrew George, a long-term campaigner for more affordable homes, said it would be hard to enforce and possibly illegal. “But I think it’s a good statement of intent and creates the right mood music.”

Not surprisingly, the proposal has caused much debate amongst developers and architects in Cornwall. Rachael Gaunt, a director at Poynton Bradbury Wynter Cole Architects in St Ives, agued that facilitating affordable housing rather than actively curbing the second home market was the key. She said that though her company paid the sort of wages offered in London, its younger staff remained excluded from the housing market in St Ives.

She said: “Cornwall and in particular coastal towns such as St Ives rely heavily on tourism and the spending power of those who take holidays here.

The issue of second homes is a difficult one as the majority of second homes provide weekly accommodation for visitors. Second homes create jobs, through design, construction and ongoing servicing. However for St Ives to continue to thrive we need permanent housing for local people too.”

Nowhere in St Ives is the second home problem more vividly illustrated than the picturesque Downalong area. Once a teeming quarter full of painters and workers, now it is almost all holiday lets, the majority empty at this time of year. “It becomes hard to hang on to the feeling of community,” said Andy, one of the few locals who still lives here. Just three of the houses in the road are occupied, the other two by elderly residents. “We could soon be the only local people living on this street,” he said.

It also means that what St Ives is most famous for – its art scene – is also changing. At the gallery run by the Penwith Society of Arts (whose founding members included Hepworth and Nicholson), Jason Lilley, an artist and printmaker said St Ives was no longer affordable for young artists. And even if they find a place to stay, they might not locate a workspace.

“In the 1980s there were 130 studios in St Ives. There are now 30.” He said most had been turned into second homes and holiday lets. “A sail loft that an artist might have rented for a few pounds a week is suddenly worth £500,000 if you sell it as a home.”

Pete Giles, owner of the Cafe Art, said this meant that St Ives probably did not have the “radical” edge when it became a beacon for artists, writers and beatniks. “It’s a more conservative place now. That seems a shame.”