Washington condemned Israel’s plan to build hundreds of new housing units in West Bank settlements, announced Wednesday, saying the move served to “undermine peace efforts.”

“We do not accept the legitimacy of continued Israeli settlement activity,”  State Department spokesman Mark Toner said. “And, we want to see both parties refrain from these kinds of actions and to get back into negotiations.”

Housing and Construction Minister Ariel Attias announced 551 homes has been approved in Efrat, Maaleh Adumim, Adam, Ariel and Kiryat Arba, on top of nearly 300 new units earlier promised in Beit El.

It would be the first time in 12 years that Kiryat Arba, adjacent to Hebron, has received new housing units. Efrat, Maaleh Adumim, Adam and Ariel are part of major blocs that Israel has insisted in the past remain in Israeli hands should the country pull out of the West Bank.

The move to build the homes is seen as a form of “compensation” to the settler movement by Prime Minister Benjamin Netanyahu for the government’s decision to comply with a High Court order to raze five buildings in the Givat Ulpana outpost in Beit El.

Attias called the move a “beautiful deal,” according to Ynet news.

“For the settlers, according to this deal, it pays that they tear down more homes, because they receive more.”

Netanyahu’s plan has come under fire from various quarters. Critics say the move is unnecessarily expensive and complicated. Settlers reject any move of the buildings.

Chief Palestinian negotiator Saeb Erekat condemned the new construction. “This is a very grave development, this undermines all efforts to revive the peace making between the two sides,” he said.