Eighteen out of 20 neighbours of the site at 18 Cross Street objected to the P&S Short Holdings Ltd proposals.
There were concerns about overlooking and increasing traffic in the town which already experiences snarl-ups.
It was the third time a development plan for the site had been proposed but on two previous occasions a planning inspector had dismissed the appeals.
But this time planning officials at Malvern Hills District Council decided that the proposals had been improved enough to overcome objections, tipping the planning balance in its favour. The decision notice was sent on January 7.
Council planning case officer Lee Walton said in his report that the "overall scheme is considered to present an appropriately laid out proposal for five cottages that has a design which reflects the character and appearance of the conservation area in which it would be located.
"It is considered that the scheme would both conserve and enhance the conservation area and would be recognisable as a development belonging to the conservation are rather than the housing to the west."
Two letters in support of the scheme were lodged, from people saying it would make their business premises safer and more secure, and that the plans are "professional and very in keeping with the area." And another which said: "It also gives young people a chance to get onto the property ladder."
But of the 18 objectors the concerns were of overlooking, traffic issues. One objector said: "New builds are not allowed in a conservation area, any development sets a precedent for more making conservation areas pointless!"
Another objector said: "This is the third application and each application has caused distress to many people."
But the council planners said that "arguably the current proposal brings forward a slightly improved proposal when it comes to considering the effect on neighbouring occupants.
"Given the distances and angles of outlook involved and what with the recent appeal decisions the revised proposal is seen to address guidance about private outdoor amenity space for future occupiers so that it is concluded that there are no matters arising from the proposed layout and design."
And they said the plans would "conserve and enhance the character and appearance of the Tenbury Wells Conservation Area."
And to add to the planning balance in its favour the development would have some "economic and social benefits in terms of short term construction jobs and longer terms gains being within a sustainable location that would continue to benefit local shops, facilities and services and would contribute to local housing need."
The developers would also contribute towards social benefits for the area, as would the affordable housing contribution secured.