Warrnambool is undergoing a major growth spurt, which has been described by Cr Ben Blain as "growth on steroids" and a Dales Road development of one and two-bedroom homes will add 36 more properties to the housing market.

Cr Blain said the development had been scaled back from 74 dwellings to 36 which was more in line with what was expected in the city's residential neighbourhoods.

After more than two years of planning, and winning the backing of council officers and the Department of Environment Water Land and Planning, the original plan was knocked back by the former councillors in December 2019 with some scathing in their criticism, saying it was opportunistic and would set an alarming precedent.

But the developer behind the project said that decision meant she could no longer push forward with a development which aimed to bring more affordable housing to the city.

Emily Reid said red tape had driven up the cost so much it had put it out of reach of those it was designed to help.

The new plan was created in the hope it would have a quicker path through council with the land on the corner of Dales and Aberline roads under offer, with the sale subject to the plans being approved.

The scaled-back project includes a mix of single-storey and double-storey homes.

And while there were originally plans to keep a medical centre on the site, that idea was ditched in the hope the plans would be approved sooner rather than later, and without a need to go to VCAT.

Cr Blain said there was a lack of diversity in Warrnambool's housing market with plenty of large family-sized three and four-bedroom homes.

"It's good to see that we're seeing one and two-bedroom units which is something I think is undersupplied within our city," he said.

"With our continued growth which we are seeing at the moment, especially growth on steroids, we do need diversity in our housing stocks."

Objectors raised concerns about traffic, open space and bins, but he said the developer had cut the development back by about half.

"By reducing the residences and the extra work to be done on managing the traffic after this was approved I feel that many of these issues would be addressed," he said.

Cr Debbie Arnott said that considering there was such a shortage of housing in Warrnambool, the development was a good idea.

She said all the concerns had been addressed.

Cr Max Taylor said he was originally concerned about the lack of open space, but was now happy with the amount the developer was allocating.

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