The plans have been given the go-ahead despite concerns about parking issues being pointed out by Llanidloes Town Council.
The planning application had been submitted by Roy Hayter, who has owned the Lloyds Hotel in Llanidloes since 1992.
Until 2015, the building was a hotel and restaurant with seven en-suite bedrooms and also accommodation for the owners.
Agent Henry Beddoes of Hughes Architects said in a planning statement: “Our clients retired from the hotel business due to health considerations but decided to remain living on the premises.
“In January 2017, our clients were granted retrospective planning consent for a change of use from hotel to private residence.
“This followed an extensive period during which the premises were actively marketed as a hotel/business opportunity but failed to attract any offers.”
The statement adds that the former hotel which is in the town centre is only five minutes walking distance to a convenience store, post office, several pubs, and places of worship.
Llanidloes Town Council had no objections to the scheme but did say that they had “concerns” over parking, which will be on the street.
On car parking issues, Mr Beddoes, said: “There has never been on-site parking associated with the hotel.”
He added that when the premises operated as a hotel and restaurant, guests and staff had to park on the street, or use one of the nearby car parks.
Mr Beddoes said: “A bicycle store will be will be provided, while the proximity to services including public transport is expected to reduce reliance on motor vehicles.”
Llanidloes County Councillor, Gareth Morgan said: “I believe some attempts have been made to sell it as a going concern, but they were unsuccessful.
“In those circumstances, it is fair to agree to a change of use.”
Planning officer, Rhys Evans, said: “The existing building has no designated parking facilities, similar to that of surrounding properties.
“However, there is sufficient street parking in the immediate surrounding area, namely Great Oak Street, High Street and Cambrian Place.
“In addition there are several car parking facilities located in Llanidloes Town Centre.”
He added that the development complied with all the relevant policies and recommended consent.