Australian news site The Age has reported that The City of Port Philip and government-appointed experts are concerned about the “underdevelopment” of a sprawling block of warehouses in Port Melbourne.

Planning Minister Richard Wynne recently approved 128 townhouses for the block on the corner of Plummer and Salmon Streets, a site that is historically important as a former top-secret experimental war tank depot during World War II and Chrysler car factory.

The area has been marked as a future “family-friendly neighbourhood” within Fishermans Bend, the nation’s largest urban renewal project, which promises homes for 80,000 people.

Towers of up to 12 and 18 storeys are allowed on the site, but a network of townhouses recently approved by the planning minister are just four storeys.

The discrepancy has led the City of Port Phillip to take the unusual step of complaining that the development is too small, appealing the minister’s decision to the Victorian Civil and Administrative Tribunal.

City of Port Phillip mayor Bernadene Voss said it was the first time she remembers the council protesting about underdevelopment.

But Cr Voss said the land was ideal for more housing, as it was close to two planned high-frequency tram routes and a new station to be built in the second stage of the Metro Tunnel.

“In some ways I really welcome the family-friendly accommodation, but of all the locations this is the ones that we’ve agreed needs to be higher density because of the services that are going to go there,” she said.

“It’s just really unfortunate.”

The council is also worried about the design quality of the townhouses, with Cr Voss describing it as a “very average”.

“Yes it OK, but the roads are very narrow, you can’t turn a truck around. There’s not much open space,” Cr Voss said.

“They have made a number of modifications to the plans that have improved it, but it’s still not good enough.”

Similar concerns have been raised by the Victorian Planning Authority, Office of the Victorian Government Architect and Fishermans Bend Taskforce since the application was lodged in 2015, undergoing numerous modifications since that time. The taskforce also deemed the plans an underdevelopment.

However the townhouses do respond to government demands for more family-friendly housing, as all the townhouses have between three and five bedrooms – a rarity in inner-city development.

Officials advising the planning minister noted that although the application could be considered an underdevelopment, it was justified by its proximity to an adjacent four-storey height zone and low-rise heritage buildings.

The development also retains the art deco-style administration building that serviced the historic factory.

However the National Trust of Australia said it was disappointed more of the original factory would not be retained.

“While the jewel is the art deco administration building, it’s not possible to understand the history of this important site without the factory complex that surrounds it,” said the trust’s Victorian advocacy manager Felicity Watson.

“Heritage can provide the fine grain that makes Fishermans Bend a desirable place to live and work, and should define the character of this area.”

A spokesman for Planning Minister Richard Wynne said the government acknowledged the council’s right to appeal the minister’s decision.

“The approved development will provide more housing options for families, and retains in full the heritage 1941 art deco building,” he said.

The land is owned by Sydney-based developers Denis Wan and Jun Ding, of Prime Port Melbourne.