The diocese wants to turn the Rosenthal Street property - granted more than 40 years ago - into housing for the aged as it looks to raise revenue that would fund compensation for abuse survivors.

Plans to build the townhouses hinge on the diocese's bid for the ACT government to scrap the land's 46-year-old status as property granted for less than market value.

The Anglican Diocese of Canberra and Goulburn said the townhouses would meet growing demand for supportive housing suited to the aged, and would fit in the neighbourhood.

Neighbours on Rosenthal Street oppose the development, saying it would overcrowd the street, dangerously increase traffic volumes, and destroy habitats for Gang Gang cockatoos and other bird life.

Resident Tanya Morgan said the townhouses would be the only multi-unit development in the area, and would sit sheer against a street of otherwise low-density housing.

The new buildings, sitting near Fairbairn Avenue approaching the Australian War Memorial, would stick out and appear an ill fit for Campbell's streets, she said.

Ms Morgan told the government the planned build was another instance of a generous concessional lease turning into a profit for the leaseholder.

"It is a well-known fact that the church is seeking to raise revenue to pay the victims of abuse, which they rightly should, but I am unaware of any controls that exist regarding the spending of funds gained as a result of the process," she said.

"The taxpayers have already paid for this site through the concessions, the lease may soon be converted to have profits not come back to the taxpayer, and the consequences will be changes to the amenities of this suburb that are not being agreed to by the locals.

"People are paying multiple times for the actions of this church."

Approval would also set a precedent opening the door to more development in Campbell, a suburb that had recently been subject to considerable change and expansion, Ms Morgan said.

The diocese has proposed finding another site to house its new bishop Mark Short under its plans to develop the Campbell property. The archdeacon for North Canberra and his family live in the Rosenthal Street building, but the church has told the government it is no longer fit for purpose.

A diocese spokesman said the proposed density was not excessive and it could have pursued a larger development on the site. An independent report by consultants Sellick found there was only minor impact on traffic.

"The development is considered to be in keeping with other sites in Campbell that have been subject to recent development or redevelopment," the spokesman said.

"The architect has intentionally incorporated textures and materials such as red brick and timber to ensure the development is compatible with the residential character of the area."

After initial consultation with residents, the diocese had tried to mitigate their concerns with a number of design changes, the spokesman said.

The ACT's planning and land authority is considering the diocese's application to remove the concessional status of the property's lease, permit supportive housing, and redevelop the land. Public submissions are open until April 30.

Planning Minister Mick Gentleman must also decide whether the removal of the concessional status from the lease is in the public interest.