Two-storey townhouses will be built in central Wodonga, after VCAT backed council plans for housing diversity in the city ahead of complaints from objectors.
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Councillors voted in February to approve the development for 20 townhouses, which would face Havelock Street and Ethel Lane.
But after six Ethel Lane residents objected to Victorian Civil and Administrative Tribunal in September, Border-based developer Alatalo Bros agreed to reduce the number of townhouses to 18.
VCAT senior member Geoffrey Code allowed the permit to be issued with extra conditions.
They include requirements for Alatalo Bros to construct a front fence at least 1.5 metres in height, reduce the number of visitor car spaces, submit stormwater drainage and management plans, and include a list of all proposed vegetation including trees, shrubs and ground covers.
"It has been the council's longstanding priority to revitalise the central business area - revitalisation has occurred and is continuing," Mr Code said.
"There is little doubt the focus for the future of the heart is intensification, economic and social vibrancy and vitality.
"The proposal accords with such aims."
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The objectors had argued that Alatalo Bros failed to meet the condition for 35 per cent of the land to be defined as a garden, but Mr Code said patio or terrace areas could be included in this definition, so there was actually a garden area of 37 per cent.
They also argued the new homes would create parking issues in Ethel Lane and the double-storey buildings went against the character of the neighbourhood.
Mr Code visited the site before making a decision.
He said the townhouses would be a change for the area, but the site was "well-located for higher density residential development".
"Along with other regional cities, there is a need to provide more housing diversity," he said.
"Differences do not equate to disrespect ... A one storey increase in height from a prevailing single-storey built form height is not so disrespectful as to warrant permit refusal."