The council has advertised a 3,642m2 area at Junction Road in Woodhouse for sale as a housing development.
Local resident Richard Pearson says the land was formerly cottages and is a brownfield site that needs housing but the council should look at a specific scheme for older people.
He said: “The site is adjacent to good bus services and the Brunswick Gardens retirement complex, and close to the railway station, so careful consideration needs to be given to how it is developed.
“Given the need for affordable social housing, the site should be for homes to rent by the elderly from the council or a housing association.
“Priority should be given to local people to downsize, thus freeing up the properties they currently occupy.”
Mr Pearson says while the council has a very limited say on what housing a developer should build, when the council owns the land it can decide what type of homes are appropriate.
He added: “This site is a community asset and should be used to meet the needs of the community and not the wants of developers.
“I appreciate the council is facing a difficult financial situation but when future circumstances allow the council to build the homes it wants to, sites such as this need to be available.”
Local councillor Mick Rooney has backed Mr Pearson and urged the council to take his suggestion into consideration.