Developers are proposing a dual-occupancy project on a former Mr Fluffy block in Reid where dual occupancies are banned under heritage zoning laws.
Reid Residents Association president Marian Albury-Colless said the suburb was being sacrificed to solve Canberra's urban densification problem.
"We were given guarantees that there would be no dual occupancies as part of the Mr Fluffy arrangements," Ms Albury-Colless said.
"I don't see why somebody should be allowed to do that. I don't see why Reid should be a sacrificial lamb to be suddenly carved up for densification.
"This is not the right way to go about environmental planning."
The application is for a one-storey, two-residence development at 72 Coranderrk Street, Reid, which is inside the Reid heritage precinct, which bars dual occupancies.
When the planning directorate was contacted about the application's violation of zoning laws, a spokesman said any public submissions on the planning rules would be "carefully considered".
Public submissions on the application close Tuesday.
The architects, DNA Architects, were contacted for comment.
The house which once stood on the block was contaminated by Mr Fluffy asbestos and demolished in 2016, before the block was sold by the government in 2017 for $1.3 million.
It's understood the government purchased the block off the owners for $1.1 million as part of the buyback scheme. It had been purchased in 1997 for $290,000, according to online real estate data.
The block is 1300 square metres in a suburban RZ1 zone - typically low-density, low-rise zones - with dual occupancies permitted on RZ1 blocks over 800 square metres.
The application said the fact the block was above the 800-square-metre limit made it exempt from the ban, despite still being in a RZ1 zone.
These houses can't be sold separately.
I don't see why Reid should be a sacrificial lamb to be suddenly carved up for densification.Marian Albury-Colless
But in 2015, the government changed zoning laws to allow dual occupancies on Fluffy-affected blocks to be sold separately.
However, heritage areas - like the Reid heritage precinct - were made exempt from this rule.
In their application, the architects point to their efforts to meet the heritage character of Reid, with their design imitating the cottage that once stood on the block, including the retention of the original hedge and letterboxes.
Each two-bedroom house would have a basement garage below, accessed by stairs leading up to each house.
Central courtyards planned for each home would help bring the development in line with soft-surface/hard-surface ratio rules on developments in the area, to ensure a set amount of green space.
Ms Albury-Colless said the development could set a precedent for further densification of Reid.
At a time when a loss of trees in Canberra was creating urban "heat islands", it was important to keep to Reid's heritage values which were based off its garden city principles, she said.
The heritage entry said the Garden City principles behind Reid's design were to create "healthy working and living environments" for workers.