The application was to build three, side-by-side warehouses within an industrial 3 zone at 9-11 Aston Street. Each three-to-four-level warehouse was to include ground-floor car parking and a caretaker's residence.

The permit application was rejected first by Maribyrnong Council. At the February appeal, Victorian Civil and Administrative Tribunal member Laurie Hewet said the council and objectors were sceptical about the proposed caretaker's houses.

"It was their submission that what is proposed is a de facto residential development presented in the guise of a warehouse development."

He ruled that the applicant, R Kirwan and A Collins, had failed to establish a legitimate need for the caretaker's houses and the design and layout of the warehouses was "extremely inefficient".

"One of the warehouses is apparently intended to be used for the storage of motor vehicles, although it is not clear how this use is intended to be accommodated on the site, given that the ground floor of all the warehouses is to be used for customer and staff car parking, and the upper levels are accessed only by a goods lift and stairs."

The case follows reports of people so desperate to live near the city that they illegally convert properties in industrial areas - less than a kilometre from the dangerous Coode Island.

As The Mail reported in October, one Footscray man tried and failed to keep living in his warehouse at the Docklands Cotton Mills complex after being found out by the council.

The council's sustainable development general manager John Luppino said since then, another three properties at Cotton Mills had been vacated and were now being correctly used for commercial purposes.

Mr Luppino said council officers were also concerned about a new planning application for an eight-storey warehouse development in an Industrial 3 Zone.

"The development includes small warehouse units with terrace and balcony areas. Council officers have expressed concern the design may provide a temptation for the units to be used for residential purposes."

A caretaker's residence is allowed if it is genuinely being used as such.