The Roads and Maritime Services has applied to demolish the heritage-listed former Seaview Guesthouse at Bulli to make way for the planned extension of Memorial Drive.
The land on which the dilapidated two-storey building sits will eventually mark the southern point of the as-yet unscheduled extension of the roadway through to Bulli Pass.
However, the RMS has revealed it wants to demolish the vacant house now to prevent further damage to the buildings and remove the opportunity for them to become home to vandals or squatters.
A heritage impact assessment, prepared by Godden Mackay Logan (GML), says the house is believed to have been built circa 1889, and has operated as a hotel, guesthouse and private residence during its 124 years.
The property was identified as a heritage item of local significance in 1991.
However, GML advisers, who inspected the site last June, said several "considerable" changes to the building's interior and exterior had diminished its historic value.
"The former guesthouse building now has limited aesthetic value due to the removal, years ago, of a number of its distinctive original architectural features and details, and the corresponding lack of its architectural integrity," the consultants said.
"The original Victorian character of the building has been greatly degraded as a result."
Documents attached to the application also reveal the RMS investigated repairing the property to rent it out but found the estimated $150,000 to bring it up to a lettable standard was too much to shell out for the expected $500 weekly return.
An RMS spokeswoman confirmed the building had been broken into three times since 2010 and said its early demolition would save money in the long run.
"RMS is proposing to demolish the buildings at 300 Princes Highway, Bulli, to avoid unnecessary spending of public money to renovate buildings which will eventually be demolished," the spokeswoman said.
Illawarra historian Carol Herben yesterday said it was a shame the old house had been earmarked for demolition.
"There's a lot of valuable heritage items in Bulli and this is one of them," Ms Herben said of the house.