After two months of negotiations over finalizing building permits, expansion of the Yale-New Haven Hospital Cancer Center could begin moving forward as early as next week.

Under an agreement reached Thursday between the hospital and New Haven officials, the cancer center will expand to include an additional parking garage on Lot E, a new Park Street office and laboratory facility and a tunnel connecting the Park Street site to the primary Cancer Center building, said hospital spokesman Vin Petrini.

Representatives of both the city and YNHH said they are pleased that arbitration has ended and that construction can begin.

Construction on the $470 million cancer center began 13 months ago, but some parts of construction were held up over the summer while the hospital sought building permits from the city and negotiated the details of the projects. The new agreement will allow delivery trucks to dock under the Air Rights Garage that sits beside the future Park Street lab. Petrini also said the fifth floor of the lab will be devoted to retail.

One sticking point in the negotiations had been the inclusion of housing on the Lot E site, Petrini said. Under the new agreement, 24 units of “market-priced” housing, as well as retail shops, will surround the 845-space parking lot, he said.

“There was a question of whether housing should be included,” Petrini said. “But it was an important priority for the city.”

Although it will be more costly, the new housing will ultimately benefit the hospital, Petrini said. The housing will be offered to patients undergoing treatment who are not in need of hospitalization and their families, and staff members will also be able to reside in the new housing complex on a temporary basis, he said.

City Hall spokeswoman Jessica Mayorga said community members pushed for the new housing during public forums hosted by the city.

“We had input from the community in the beginning,” she said. “It was important that we uphold the interests of our residents.”

Board of Aldermen President Carl Goldfield said the inclusion of housing along with the parking lot is symbolic of the hospital’s new-found commitment to the city. Building a parking lot by itself would imply that hospital workers could just come at the start of the day and leave at the end, Goldfield said. He said the current plans do a better job of integrating the hospital and the community, thus avoiding the creation of “a city within a city.’”

But the hospital has not always been as willing to take an active role in the community, Goldfield said. He said he hopes the agreement signals that the hospital has finally realized the importance of being a “good citizen.”

“Yale woke up one day and realized that it needed to have a good working relationship with the city,” he said. “We’ve been waiting for the hospital to come to that realization.”

Ward 23 Alderman Yusaf Shah said the city needs the revenue that the projects will bring in.

“I’m looking forward to all the development happening as quickly as possible because we need the taxes to offset the tax burden on our residents,” Shah said. “I’m glad it’s over.”

The city’s budget rose by $45 million this year, and the additional tax revenues from the new commercial space may help fund the increases.

Robert Alpern, the dean of the School of Medicine — which is a partner in the cancer center — said he is delighted that the city and hospital have reached an agreement.

“Obviously, anything that helps the cancer center is good for the medical school,” he said. “Without parking, the center never would have opened.”

Petrini said the rest of the cancer center construction is on budget and proceeding on time. Completion of the center is expected by 2009.