City of Newcastle staff have recommended councillors approve a five-storey apartment block on the former Mon's restaurant site in Darby Street, angering Cooks Hill Community Group.
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The project includes demolishing the existing building and replacing it with ground-floor commercial space, three floors of apartments and a roof-top garden.
The new building exceeds the block's 14-metre height limit by three metres, but a staff report to go before the council's development applications committee on Tuesday night says it is of an "appropriate scale and form for the site and the character of the locality".
Cooks Hill Community Group opposed a six-storey apartment block a few hundred metres down the road before the council rejected it in December due to its height and privacy impacts.
It has also lodged objections to a four-storey commercial and residential proposal across the road on the Darby Raj site which was lodged in May 2018 but remains unapproved.
Now the group is gearing up again to fight the Mon's redevelopment.
Spokesperson Glenn Burgess issued a media statement on Sunday saying the community was "aghast" at the recommendation to approve a building which would be "disastrous for the heritage streetscape and set a precedent for similar future development along the rest of Darby Street".
He said the new structure would "dominate" surrounding two-storey buildings.
"Council recently refused a DA on the old RTA site at 59 Darby Street for height exceedance. How is this site, in a more sensitive area, any different?" he said.
The Urban Design Consultative Group, which provides advice to the council on redevelopment proposals, said in the report that the existing post-World War II building was "nondescript" and contributed nothing to the area's heritage value.
But Mr Burgess said his group believed the building, which is in the Cooks Hill Heritage Conservation Area, contained remnants of the 1858 Old Oak Hotel.
"Does this council want to be remembered as the council that ruined Darby Street? This is not the sort of revitalisation Darby Street needs."
The developer's heritage impact statement argues buildings of various modern architectural styles already line Darby Street's retail precinct without affecting its vibrancy.
Greens councillor John Mackenzie told the Newcastle Herald that the community rightfully expected the council to preserve the character of its suburbs.
"This is especially true for a suburb like Cooks Hill with its rich cultural and historic significance, liveable streetscapes and vibrant sense of place," he said.
"Appropriate development needs to meet the needs of the city into the future, but not at the expense of its unique, local character."