The Anglican diocese's plans to replace its bishop's house with townhouses in a Campbell street are at an impasse after the ACT planning minister refused to scrap the land's below-market lease.
Planning Minister Mick Gentleman's decision leaves the future of the proposed build uncertain, but has won applause from residents who feared it would overcrowd the quiet street.
Plans to build eight double-storey townhouses for the aged at Rosenthal Street hinged partly on the church's bid to have the government cancel the land's status as property granted at below-market value.
Another block in Deakin, the former St Luke's Anglican Church site on Newdegate Street, was also destined for units if the government agreed to rescind its concessional lease.
The diocese proposed the developments as it looked to raise revenue that would fund compensation for abuse survivors.
Mr Gentleman rejected the diocese's applications to remove the concessional leases, finding it wasn't in the public interest.
A government spokesman said the decision didn't sink the development plans, and confirmed the independent Planning and Land Authority would still consider approving the projects.
Diocese general manager Trevor Ament said it would consider its next step once it learnt the reasons for the rejections, adding that the developments were consistent with its mission.
"We are not in a position to outline what future options are available to us," he said.
Mr Gentleman also refused applications to remove concessional status for Canberra Services Club leases this week. It is understood the decisions are unprecedented.
Asked about the series of refusals, the government spokesman said each application was assessed individually on its own merits.
Mr Gentleman considered submissions from the public and advice from the planning directorate before rejecting applications for the Campbell and Deakin sites.
"The minister also considered the potential disadvantages to the community if the lease was varied to include other uses and the importance of preserving existing community land for use by all members of the community," the spokesman said.
Rosenthal Street resident Tanya Morgan, who opposes the diocese's plans, said the government's decision was an important win for the Campbell community.
"Good sense seems to have prevailed. In our view, this has always been an excessive development proposal for this block of land," she said.
"It has always seemed to us as highly intrusive in the residential Campbell setting and sure to generate serious traffic issues."