A project billed as Canada's largest affordable housing community has stalled over a 24-year-old clause limiting housing density on the site.

Habitat for Humanity Nova Scotia plans to create the 78-unit development on a five-acre site in the Halifax community of Spryfield. It would include rows of townhouses and a four-storey multi-unit building.

The plans were unanimously approved by Halifax Regional Municipality and work was set to begin in the spring — until the clause surfaced.

Steven Adams, the councillor for the area, said the restrictive covenant limits density to duplexes or smaller.

"Habitat wants to put in some townhouses and an apartment or condominium and that is contrary to the covenant," he said Monday.

Adams said the covenant appears to date from an April 1994 agreement between Cadillac Developments and Paradigm Investments. Paradigm owns Foxwood Terrace, a multi-unit residential development next to the parcel of land in question.

"I would think they put this in place to protect their property from competition," he said.

Habitat for Humanity Nova Scotia got the land from Cadillac Developments in 2012.

Adams did not know why the covenant is only coming to light now.

Matter between two land owners

Brendan Elliott, spokesman for HRM, said it was a private property matter between the two land owners and does not involve the municipality.

Habitat for Humanity plans to build its largest project in Canada in Spryfield. The development would include townhouses, apartments and condos. (Submitted by Habitat for Humanity)

Kathryn Toope, spokesperson for Habitat for Humanity Nova Scotia, said they spent two years working on the development agreement.

In a news release, she said the covenants were registered "at the request of a neighbouring landowner."

"The restrictive covenants may restrict the development approved by HRM and HFHNS has been unable to negotiate a reasonable resolution to the issue with the neighbouring landowner," she said.

The legal firm McInnes Cooper is helping Habitat for Humanity Nova Scotia.

Adams offered to mediate between Habitat and Paradigm.

"I hope it comes to a favourable resolution for everybody. This is a good project. It would be a landmark development for Habitat," he said.

"This is 78 affordable housing units that give people a chance to get their feet on the ground and raise their families."

Rent kept to 30 per cent of income

CBC News was unable to reach Ron Boston, president of Paradigm Investments. CBC spoke to Habitat for Humanity, but they did not provide an interview.

Habitat for Humanity Nova Scotia earlier said the apartments would be rented at a rate of no more than 30 per cent of a tenant's income.

Families apply to be placed in a home and those who are selected receive a mortgage with no interest and no down payment. In exchange, they must volunteer for the organization for 500 hours on a construction project or in another capacity.