Most opposed the project, with neighbours lobbying the council to abandon the plan over their concerns their property values would fall.
The council was told the neighbourhood would “deteriorate”, according to minutes of a council meeting in August 2018, with business owners also claiming the development would make running a business in Carlisle Street more difficult.
One home opposite the car park is currently for sale for more than $1 million.
The council pushed ahead and, in April, it agreed to give HousingFirst more time to seek funding and development permits, after the provider raised concerns it would have to pull out of the deal unless the state government stumped up cash for construction.
HousingFirst chief executive Haleh Homaei said the development would be community building.
“There is already a wonderful sense of community in this part of St Kilda, which will be enhanced by the careful planning, sensitive design, and high-quality community building initiatives we will bring to this project.”
Housing Minister Richard Wynne said the funding would come from a $2.7 billion building package, designed to kickstart the Victorian economy amid the coronavirus pandemic. The package includes nearly $500 million for public and community housing.
“Our Building Works investment will refurbish, upgrade and build more than 23,000 properties across the state, making sure Victorians have the safe and affordable housing support they need,” Mr Wynne said.
The new building, adjacent to Balaclava station, will be home to families, older Victorians and people living with disabilities.
Mr Wynne said the project would include several “twin key” apartments, which are two neighbouring apartments with an additional shared entrance. These apartments provide more space for larger families or a second room if a tenant requires a carer.
Port Phillip Mayor Bernadene Voss said the joint venture couldn’t have happened without the state government.
“This a great example of what can be achieved when local government works with the state and housing associations to provide much-needed housing in our backyard and we hope more partnerships will follow,” she said.
A replacement car park will be built beneath the apartment building.
Albert Park MP Martin Foley said the development would accommodate people struggling to make ends meet.
“These innovative and affordable apartments will mean people in our Port Phillip community struggling to keep a roof over their head will have access to the housing they deserve – we’re proud to support them.”
Bianca Hall is City Editor for The Age. She has previously worked as a senior reporter, and in the Canberra federal politics bureau.