Human faeces, syringes and anti-social behaviour have plagued the Brisbane Street Mall since several rough sleepers moved in about six months ago, a business owner says.
But Coffee Republic owner Robin Smith said he also saw some sickening attacks on the city's vulnerable.
The situation came to a head on Tuesday morning when police were called to an incident involving three homeless men at the mall, leading to all three being arrested and charged.
Police were called to the mall about 7.35am on Thursday after reports of men being verbally abusive and threatening.
Police said the three men were given a direction to leave the area but failed to do so, resulting in the trio being charged with failing to comply with a police direction.
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The men - aged 39, 47 and 41 - were bailed, but shortly after the 41-year-old man allegedly breached his bail and was returned to custody.
Tasmania Police said it was liaising with the City of Launceston council in relation to the matter.
Mr Smith said everyone had a lot of sympathy for the rough sleepers' situation and didn't want to just get rid of them, but the situation in the mall had become dysfunctional.
"I've got many videos on my phone and CCTV footage of the rough sleepers screaming at council morning crew trying to cleanse the area," he said.
"There's no one who doesn't have sympathy for them but it couldn't continue."
Launceston Mayor Albert van Zetten said there had been ongoing complaints in recent weeks about anti-social behaviour in the Brisbane Street Mall, specially near the former Birchalls building.
"The council has passed on these complaints to the interstate owner of the former Birchalls building, and recent work on property was undertaken by a private contractor with the consent of the owner to improve the security of the building," Cr van Zetten said.
Two entrances to the building where homeless people had been sleeping and spending their days have now been boarded up.
Belongings left in the mall by those sleeping rough are being safeguarded by the council until the owners can collect them.
Mr Smith praised the efforts of council staff and police for the way the situation was handled.
"I think the police officers went over and above their duty to be sympathetic," he said.