Personally I cannot see the Priory ever being fit for purpose. To exist as a pub, if the houses were built to provide some custom, then it would need proper kitchen facilities, toilets and cellar capability for beers to compete with Sandford or the existing pubs in the Leys.. As it stands, none of these are to hand. Add on to that the problem of the sewage farm across the road with the related "odours" and you have no business in the summer.
If the proposed house were to be built on what is now the sewage farm then perhaps there is a future, albeit, not immediate.
I can understand the reticence of FK to do anything which would cost money however, he is legally obliged and should be reminded of that obligation and if nothing happens, penalised in the only manner he understands.