In December last year CatholicCare Tasmania and Launceston City Mission sought City of Launceston council approval to build 24 two-bedroom units on the corner of Hobart Road and Alma Street.

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The not-for-profit organisations wanted to demolish the Log Cabin Garden Centre to make way for the housing development.

In a report which councillors considered at a meeting last week, town planner Duncan Payton said the proposed development aimed to address growing demand for affordable housing in the Launceston region.

"The proposed...affordable housing units each have an area of private open space that, arguably, is appropriate to the size of the dwelling and able to provide outdoor recreational space to meet the reasonable needs of the occupants," Mr Payton advised councillors.

"Whilst the proposal satisfies the acceptable solution in terms of maximum site coverage being less than 50 per cent and impervious area being greater than 25 per cent, only four of the proposed 24 units has the requisite 60 square metres of private open space...units one to 10 each have only 10 square metres of private open space."

Mr Payton said while the area provided for each unit varied, it was relevant to note the units were "relatively small".

"These dwellings are not intended to cater for most families and their need for outdoor space is therefore less," Mr Payton said.

"They provide small areas of open space, commensurate with the small balconies of apartment living. This is combined with a small community garden and ready access to public transport, a public park close by in Alma Street and a location within walking distance of shops and services."

The proposed development should have been approved, would have delivered economic benefits and helped resolve growing social and economic inequities caused as a result of an affordable housing shortage, Mr Payton said.

In response to Mr Payton's report Councillor Tim Walker successfully moved a motion to stop the development from going ahead

Councillors unanimously supported the motion to reject the development on the grounds that it did not demonstrate "sufficient social or community housing benefit" and contained insufficient private open space, car parking space and storage space.

"There does not seem to be any difficult with the concept of rezoning [to allow the development]," Cr Walker said.

"It has to do with the density with the development."

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Cr Walker said he feared the development could lead to a situation where "we have what would appear to be less than desirable housing".

A proposal to rezone the land the proposed development would sit on, from commercial to residential, was unanimously supported by councillors.

CatholicCare Tasmania's executive manager of housing services Ben Wilson said the organisation was disappointed councillors voted against a recommendation to approve the development.

"The delivery of a new project such as what has been proposed at Hobart Ro0ad, Youngtown is critical to addressing the current housing crisis," Mr Wilson said.

"We will work with council to amend the development application to ensure this vital project is approved. It is critical that we work to ensure this development progresses to help alleviate the housing shortage."

The Housing Industry Association's executive director in Tasmania, Stuart Collins, said the orgasination predicted up to 7,000 construction jobs in the state would be lost in the next 18 months due to COVID-19.

Mr Collins said the HIA predicted that by July 2021, the number of new home builds would fall by 40 per cent in Tasmania.