The Meander Valley Council rejected its own application to establish a free self-contained vehicle camp site at Westbury Recreation Ground due to its impacts on nearby homes.
Council received 12 submissions objecting to the application citing privacy and noise issues on nearby residences, littering, public urination and property devaluation.
Hagley RV Farm Stay owners, Steve and Annette Camino, said it had been two months since they opened their doors and MVC wanted to open a free site less than five kilometres away.
"Council has deliberately set us up to fail," Mrs Camino said.
"Council should not be setting up a business where another business is directly in competition."
Mr Camino said there was a complete lack of consultation with them.
Under the application 15 RVs would have been allowed to camp for free on a site on a grassed area in the north-east and south-east of the recreation ground.
Cr Rodney Synfield said it was an inappropriate place to put the RV site.
The council closed the grounds to camping in February 2018 after nearby residents made complaints about the legality of the camping.
Residents of Jones Street expressed their opposition at the meeting, stating it would impact them 24 hours a day with no rest.
Julie Summons has lived on the street for 40 years and challenged councillors to have 15 to 30 camper vans in their front yard and not feel some aggravation towards them.
David Pitman said it would be rate payers paying the $5000 cost associated with the development yet would be used by zero rate payers and harmed a rate payer's business, the Caminos.
"I don't want to subsidise the lifestyle of gray nomads travelling around in caravans that cost more than my house," he said.
Cr Stephanie Cameron said she would not want the development over the road from her house.
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