Applicants looking to change the use of Oswald House, in Oswald Road, Oswestry told councillors that the flats across the first, second and third floors of the building would provide a high quality environment for residents and a boost to the town.
But councillors at Shropshire Council’s Northern Planning Committee on Tuesday disagreed. They said it would only provide six square metres of living space each for tenants, who would have no room to dry clothes or store their wheelie bins.
Oswestry Councillor Duncan Kerr said converting the former bank into a HMO would cause social problems and add to a "cycle of decay" in an area that is already seeing "daily visits by police."
Councillor Kerr added that the town council is not against HMOs generally but was in this case because of where it would go.
"We do not want to create ghettos, it is about the number of units here," he said.
Planning agent Dave Morse said the operator would be a very experienced operator who would apply a careful selection of applicants and be harmonious in the community.
"It would be a high quality environment for residents," he said.
Members of the committee lined up to oppose the plan saying it was overdevelopment.
Councillor Ted Clarke (Bayston Hill, Column and Sutton) said he was uncomfortable with the plan.
"It is too intense a development," he said.
The committee was told that the council's housing department had not objected to the amount of living space to be provided but six members of the public had spoken out against it.
The committee was told by officers that it was a "finely balanced application" and the applicants had proposed giving section 106 money to the council to compensate for the lack of open space in the proposal.
Councillors voted unanimously against planning officer recommendations to reject the plan.