Plans for a 74-apartment development and medical centre in Warrnambool's east were slammed as "opportunistic" when they were unanimously rejected by councillors on Monday night.
Cr Peter Hulin described the Dales Road development as more like a hotel complex than residential accommodation and if it went ahead it would set an "alarming precedent" for the city.
"I don't think it's what Warrnambool wants. They don't want it now and I don't believe they'll want it in the future," he said.
Cr Mike Neoh said the development would be a litmus test if it ended up at the Victorian Civil Administrative Tribunal.
"I think it will open the floodgates if a development like this is approved," he said.
There were 99 apartments in the original plans for the site that were submitted to the council in April, but was scaled back to 74.
It was recommended councillors endorse the revised plans because they met Warrnambool's planning scheme and Development Plan Overlay requirements.
But Cr Kylie Gaston said that while she understood council officers were bound by the rules and regulations of planning, councillors could look at a proposal from the human side where the rules of planning didn't always get a great outcome.
Cr Gaston said the development plan didn't sit easy with her, and while she understood the need for high-density living, she wasn't convinced the proposal met the objectives of the North East Warrnambool Structure Plan.
"This development strikes me as being being opportunistic," she said.
A number of councillors said the documents weren't detailed enough and the development didn't reflect the density and character of the neighbourhood.
Cr Neoh moved the plan be approved subject to the buildings being two-storeys or less, but it got no support from other councillors.
Cr Neoh said said he had not seen a development of that intensity in his time on council.
"I think this will be a litmus test if it does end up in VCAT," he said.
Cr Hulin said the development was "completely out of character" for the area and wasn't fair to the people who had spent a lot of time and money building their homes nearby.
"The developer is trying to squeeze as much out of an area as possible with seemingly no consideration for the people in the area or for the people who will try and live there," he said.
"It's just so densely constructed, I just can't see for the life of me how there won't be not an ideal outcome to this in the future.
"It's disturbing for a number of people in the community when a development plan like this comes to council, when they see their way of life and their area of our city potentially going to be changed dramatically."
Cr Hulin said the development was better suited to a greenfield site.
He said he was also concerned developers could provide "attractive pictures" of what they intended to build but history had shown that in a lot of cases what was actually built was "nothing like what gets put to council".
Concerns were also raised about the adequacy of private open space.
Cr Sue Cassidy said she had concerns about the impact the three-storey buildings would have on the developer trying to sell blocks next door, fearing it would put buyers off.
She said she was also concerned with the number of cars at the 74 units if there was more than one person living in each unit.
"I just don't understand where all these cars are actually going to go. It would take it from 74 cars to over 100," she said.
"I realise the more units if they're joined together the less cars there actually is, but that's only a maybe."
Cr Cassidy said she was concerned about the impact on an already busy intersection.
Cr Robert Anderson said it was out of character for the location.
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