Wollongong City Council has knocked back a controversial request to allow permanent residents in a new development on Austinmer's dilapidated Headlands Hotel site.
However, the developer, the Stevens Group, has fought back with an appeal against the council's "incorrect" decision over the site, where it plans to build a $25 million complex containing a hotel, restaurant and 69 serviced apartments.
According to documents lodged by MMJ Town Planning of behalf of the Stevens Group, the council last month refused a bid to remove conditions that prevent permanent residency on the site.
Austinmer residents raised concerns about the plan in October, saying the developers were trying to build a residential apartment block "by stealth" on the prime piece of coastal land.
In its rejection letter, the council said this would be inconsistent with the site's tourism zoning and "set an undesirable precedent for similar inappropriate development".
But Stevens Group has now lodged a revised application, in which only one of the planned three buildings would allow for residents to live in the serviced apartments on a permanent basis.
The developers have also submitted legal advice outlining why they believe the council should reconsider its decision.
They claim the council has based its refusal on the 2009 version of Wollongong's Local Environment Plan (LEP) but that it instead needs to be considered according to the 1990 LEP.
This applied because the hotel complex was based on an application that was approved in 2004 and remained active because some works started in 2007.
For these reasons, Stevens Group said its request should be "assessed on its general merits".
"The proposed modification to the consent now sought is not intended to encourage permanent residential occupation ... at all," the documents said.
"This development will be managed in its entirety as a tourist facility.
"By design, the accommodation type will still be serviced apartments [which], by their very nature, do not attract owner-occupiers."
They say people should be able to reside in the apartments on a semi-permanent basis to provide flexibility for long-term visitors to the University of Wollongong.
The Headlands site has been the subject of 15 development applications over the past 28 years, with 10 of these determined in the Land and Environment Court.
The Stevens Group proposal will be available on the council website until submissions close on February 10.