Dreams of utopia in a potato patch: Young families rush to be part of proposed 'co-operative' town with low-cost, low-carbon homes

A rickety farm gate opening on to a muddy track that heads up a windswept hillside towards a distant stand of pines might not look like the entrance to a new utopia. This year, however, work is set to begin which could transform this former potato farm in Lanarkshire's Douglas Valley, into Britain's first new garden city for nearly a century.

Owenstown is named after the visionary philanthropist Robert Owen whose New Lanark model village, now a Unesco World Heritage Site, is close by. Owenstown, could one day be home to 5,000 co-operative pioneers drawn by the promise of living and working in a society that is being described as "a new international benchmark for utopian living".

Four local businessmen have already stumped up £3m for the 2,000-acre site on which they plan to build 3,200 affordable homes in a low-carbon settlement based on Owen's enlightened principles, which means it will be governed and owned by its citizens. It is hoped that the £500m project will eventually yield more than 4,000 jobs – helping revitalise an area ravaged by the decline of coal mining and other traditional industries.

Although it is yet to be granted planning permission by South Lanarkshire council, which meets next month to decide its fate, the prospect of living at Owenstown is already generating considerable interest not only in the UK but also across the rest of Europe.

"We have had 1,500 applications with very limited publicity. What we do get is a lot of young families – couples in their twenties with children. Both might have jobs but they still cannot afford to have somewhere to live," said Martyn Greene, co-ordinator of the Hometown Foundation, the charity set up to make the vision a reality.

One of the objectives of the town is to provide affordable housing, with the community founders hoping to offer high-quality, environmentally friendly homes – many built at a factory on site – at 60 per cent of the market value. Bill Nicol, the project director, said this would be achieved by adopting Owen's principles and the garden-city ethos of minimising the land, labour, capital and entrepreneurial costs and passing the benefits on to the user.

Whereas mainstream developers would concentrate on building in honeypot areas around Edinburgh and Glasgow, Owenstown will create quality housing in an area that would otherwise continue to decline, it is claimed."Surplus funds will be reinvested into the community instead of being sucked out by property developers or landowners as profit," Mr Nicol said.

The idea of a new garden city has been gaining political traction in recent months. Pioneered in the UK by Sir Ebenezer Howard at Letchworth, Hertfordshire, the model was repeated at nearby Welwyn and then in suburban developments such as Hampstead, west London.

The main political party leaders, who have been urged by the Policy Exchange think-tank to commit to building a garden city in the next Parliament, have all backed versions of the concept as a possible way of meeting the 1.5 million shortfall in new homes predicted by 2020.

The Wolfson Economics Prize is offering £250,000 for the best proposal for a 21st-century garden city. Mr Nicol believes that the economic crisis of recent years has created a demand among a new generation not to repeat the mistakes of their debt-burdened parents.

"It is about living within their means, living and working within the community. As a young professional, to be able to set up a business, live close to where you work, and not have to chase a high-value job to prop up an unsustainable lifestyle is very attractive," he said.

The community's would-be founders, who intend to live in Owenstown, say it will bear little resemblance to unloved Scottish new towns such as Glenrothes and Cumbernauld, which were assembled around the needs of the motor car. Instead, it will be designed on a human scale, under the democratic control of neighbourhood committees, with leisure and work needs given equal priority.

The seven quarters, radiating out from a civic core, will be built in the Scottish vernacular style. There will be three schools (two primary and one secondary), sports facilities, generous allotment spaces for residents to grow – and trade – their own food and thousands of acres of open countryside.

As well as provision for children and families, there are plans to create living space for the elderly close to the civic core. It is also intended that there will be a hotel, cafés, restaurants and shops, land and buildings for industry, and an electric bus service. But first the scheme must overcome objections to its impact on the environment and local transport, and claims that it should be built on a brownfield site.

"Today, it is unlikely that Robert Owen would be given planning permission to build New Lanark," said Mr Nicol. "This land is not in the local development plan, but this is a nationally significant project. There has been a mixed reaction, but most councillors are sitting on the fence," he said.

Ironically, it was Owen's repeated clashes with the local authorities that persuaded him to decamp to the US to recreate his utopian vision at New Harmony, Indiana, although the experiment unravelled in 1828.

But the Hometown Foundation said that even if the scheme is rejected, it will press ahead somewhere else – assuming that the Scottish government does not step in to support the plan. "There is a 100 per cent chance it will happen somewhere," said Mr Nicol. "Even if it doesn't happen here we will look elsewhere. The trustees are determined to deliver on the project."