South Downs Holiday Village is to become housing under plans submitted by the site owner this week.
The tourist site in Bracklesham is currently occupied by agricultural workers under a temporary permit until October 2018.
District councillors have previously voiced concerns about a loss of tourism use at the holiday village, which closed down in January 2017.
Developer Seaward Homes’ application (reference 18/00753/OUT) argues that the 85 homes are needed to make up the council’s five-year housing supply after delays delivering other housing sites.
A design and access statement reads: “Consultation has taken place with the parish council resulting with the inclusion of some bungalows to meet local demand.
“The proposed residential development would provide a much better use of the unsightly brownfield site.
“It would also create all year round use of the site and local facilities.”
A play area, public open space and other infrastructure are included in the proposals, which were put to residents in a public exhibition last November.
Overall, 53 per cent of those who gave feedback at the exhibition were opposed to residential development at the site, the planning application states.
Nineteen per cent were supportive outright of the proposals and a further 15 per cent of comments were partially supportive, with specific reservations about the plans.
Comments included concerns about additional traffic on Clappers Lane and requests for a public swimming pool to be included.
Any development would take place after workers employed by Cre8 have vacated the holiday village.
Cre8 had asked for two years’ permission until 2019, but this was reduced by district council planning committee members last December, who stressed the importance of exploring avenues to return the facility to tourism long term.