The £6million development in Newbyres Crescent, Gorebridge, faces being pulled down amid fears of carbon dioxide leaking into homes from old coal mines.
Council chiefs now plan to demolish the 64 houses, built just eight years ago, and rebuild them from scratch at a cost of £12 million, or sell off the cleared land entirely.
Six people have been hospitalised since the problem emerged in September, and five families have been permanently evacuated.
Midlothian Council leader Owen Thompson said: "We as a council don't have the authority to call for a public inquiry. But we have written to Health Secretary Alex Neil and the chairman of NHS Lothian, Brian Houston, because the first priority has been to make it safe for residents.
"But now it's appropriate to look at how did this happen? There are some questions about that and we don't know the answers."
Midlothian Council has asked the Scottish Government to investigate why the houses were not fitted with protective gas membranes.
Housebuilder Lovell insisted it followed instructions from the council's design team.