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CITY of Greater Bendigo councillors have opposed a development at Epsom, despite it "ticking all the boxes" and fitting within the residential strategy.
The proposal to build 18 single-storey units at 73 Howard Street had 30 objections.
The area is within a floodplain and several residents have opposed the development since 2012, saying it is not consistent with the surrounding area and posed serious drainage concerns.
City of Greater Bendigo councillors voted against the council recommendation to support the development.
All but one councillor opposed the proposal, on the grounds of amenity loss, neighbourhood character and flood risk.
"It's totally inappropriate for the site," Cr Peter Cox said.
"If it was near shops, around denser housing and wasn't in a floodplain it would be a good development but it's in the wrong location."
A council report noted flood risk concerns, however the North Central Catchment Management Authority withdrew its opposing submission last month.
Despite this, many councillors agreed the flood risk was too great to allow for development.
Cr Rod Campbell and Cr Helen Leach said it was important to protect residents from unnecessary danger.
Cr Elise Chapman backed the development, saying it "ticked all the boxes" and fit within the residential strategy.
"We have been told we need to provide a diverse range of living and this provides just that," she said.
She said the original proposal for 29 low-cost units had been reduced to 18, which was a large improvement.
However a document shows that all neighbours directly bordering the proposed development were still opposed to the plans.
Resident Andrea Metcalf, who spent $7500 fighting the initial proposal, says the councillor's decision was a win for the residents.
"It has taken an enormous amount of work to have council include flooding in opposing this development and our ward councillors have worked very hard on this to get their peers support," she said.
Cr Lisa Ruffell said the neighbouring residents had stood up for their beliefs and principles.
The proposal was refused by the Victorian and Civil, Administrative Tribunal in 2013.
It will now go back to VCAT after the council failed to act on the application within statutory time frames.