The government passed a "technical amendment" to the Kingston master plan earlier this month to allow a hotel to be built on the Section 49 block, a final step towards selling the block to private developers.

While the land sale and "art precinct" development tender ruled out buying the Heritage-listed Powerhouse, it would allow private owners to buy the Heritage-listed Old Bus Depot and potentially Wentworth Offices, currently home to design and printing firm Megalo.

Two firms are in the running to win the project, after a request for tender was issued last year calling for proposals for the "arts precinct" that included residential, retail and commercial developments and also pledged to overturn the ban on hotels on the site.

A Land Development Agency spokesman said the agency had been "discussing a change of use to allow childcare and a hotel since 2015" and the change would give the "successful tenderer greater flexibility" under a contract to be awarded in December.

The technical amendment included re-drawing the boundary of Section 49 to include the ACT Heritage-listed Old Bus Depot on the same block of land as the Powerhouse building that is home to the Canberra Glassworks.

But the changes also remove "hotel" and "childcare centre" from a list of "prohibited developments" on the site, paving the way for a potential new hotel development on the massive site of about 40,000 square metres.

Greens MLA Caroline Le Couteur said approving a hotel to be built in the arts precinct was "not a technical amendment, it is a substantial decision that should be open to community consultation and input". "I am concerned at the increasingly frequent use of 'technical amendments' for decisions that really require community engagement," she said.

"The Greens are very supportive of the Kingston Arts Precinct, it is a big opportunity to build something great for all of Canberra, but the way the foreshore was developed highlights the friction between the competing interests of developers and the community."

Widely promoted as a new home for the arts and culture in Canberra, the original list of "prohibited developments" for the block expressly ruled out hotels, child care centres, motels, boarding houses and churches; but the official CZ5 "mixed use" zoning of the block instead allows for a more commercial development.

"People will be more drawn to an area that includes a broad range of uses, particularly uses that support their interaction with the precinct and or provide their employment," the amendment reads.

"Hotel and childcare centre uses can both assist in achieving this outcome, especially in the context of the underlying commercial CZ5 mixed-use zone intent of the broader Kingston Foreshore area."

The technical amendment said hotels could "encourage and promote both national and international visitor access, generate pedestrian traffic, employ significant numbers of staff and provide the opportunity for tourists to engage in the area by staying locally".

"Childcare facilities can provide employment opportunities, and also assist in making employment more accessible for people wanting to work in the creative industries and other businesses located within the area," it reads.

The amendment released earlier this month also included a new clause ensuring anyone proposing a development on the site must complete a full contamination audit of the area proposed to be developed to satisfy the Environmental Protection Authority.

The block is listed on the ACT's Contaminated Site Register and the soil at the site is understood to be contaminated with asbestos.

But an environmental audit commissioned by the Land Development Agency earlier this year showed the contamination should pose only a "low risk", as long as the EPA's audit and remediation requirements were met.

While the government has not yet sold the land, it has issued three "licence tenures" over areas of the block to companies or people the government has refused to name.

It is unclear what those tenures relate to, as the type of licence issued was not identified in planning documents, but they could include developments such as outdoor dining areas or built canopies over the land.

The environmental audit also confirmed the LDA intended to have a major new development built on the block.

That audit showed the LDA's "intended use" for future development at the property was a "high-density residential and/or commercial development (with or without basements) and including childcare facilities within the commercial development on levels above ground floor (with no on-ground outside facilities)".