Cabonne Shire Council has approved a development application for a $300,000 four-lot detached medium density unit development in Ferguson Street.
Existing structures will need to be demolished before the development proceeds on the corner of Ferguson and Waddell Street.
"Canowindra's desperate for housing," Cr Katherine O'Ryan said of the proposal.
"This is a really efficient way of building affordable housing in the community."
"From experience this is exactly what that part of the town needs," Cr Andrew Pull said.
"It will fit in absolutely perfect to other buildings already in that area of the street," Cr Pull said.
Supporting Cr Pull's view, Cr Jenny Weaver said: "the condition that land is in at the moment would be vastly improved by this application."
While Council approved the development it did so with a deferred commencement consent of 12 months.
In his report to the April council meeting Cabone's general manager said this was needed as the "proposal is deficient in relation to visitor parking and the ability to stack parking in front of the (proposed) single garages"
"The proposal also assumes the demolition of the existing building which will require a Preliminary Site Investigation under the SEPP (Resilience and Hazards) 2021." the general manager reported.
"It is recommended that the application be approved and a Deferred Commencement Consent issued requiring that these matters be satisfied within 12 months of the date of determination." he said.
Canowindra councillors Jenny Weaver and Kathy O'Ryan moved and seconded the development.
"There is a need for this type of development if done properly," Cr Andrew Rawson told the meeting.
"We're talking about a town that has a heritage appeal, that is something that you wouldn't want to reduce or destroy in any way.
"We should have some level of control over the streetscape of all new developments in the town, not just with the main street. It is a beautiful town and I certainly wouldn't want that to be impacted at all by any new development with poor architectural standard and poor quality of workmanship.
"Is there any way in which we can control that?" Cr Rawson asked council staff.
Mayor Kevin Beatty assured him it is controlled through council's development department.