Three heritage homes at the intersection of Napier St and Kenmure Rd, built between 1894 and 1899, were demolished on Monday.
Housing development company TGC Homes received consent from the council to demolish the homes and is planning to build 24 two-bedroom townhouses in their place.
TGC Homes director Charles Blair said the planned townhouses would provide warm, affordable housing to meet present market demand and "tick everyone’s boxes".
The company had worked with the council to do what it could to maintain the heritage qualities of communities.
"New Zealand’s a young country and so it’s particularly important to maintain and preserve heritage where we can.
"But also, we have to allow enough development for the redevelopment of housing stock because we need new warm homes that have better health outcomes for their occupants."
Southern Heritage Trust chairwoman Jo Galer said areas with fewer heritage values should be considered for warm and affordable housing.
"What we could end up with is a bunch of fantastically affordable housing everywhere, but nobody wants to come live here anymore because Dunedin has lost its beauty, its architectural merit."
She believed the second-generation district plan (2GP) had opened up the floodgates for developers, leading to housing intensification in Dunedin.
"They can subdivide down to smaller and smaller lots and then build up as well.
"All these things are allowed to free up the ability to pretty much turn Dunedin into masses of Coronation Street if they want to," Ms Galer said.
"I mean, is this how we want Dunedin to look in the future?"
There were four Mornington buildings with heritage provisions or protection under the 2GP, one in Māori Hill and eight in Roslyn.
"We worried about this at the time when the council set the policy in place, and we lobbied against it.
"We destroy it and our main attraction goes with it."
Council advisory services team leader Mark Mawdsley acknowledged the important contribution historic architecture made to the character and identity of Dunedin.
As part of recent changes to the 2GP, known as variation 2, a hearings panel had included a new rule requiring resource consent before the demolition of any pre-1940s building in certain parts of the city, he said.
The rule aimed to protect potential heritage buildings not already formally protected, to balance the intensification of residential development that also came with variation 2.
However, late last year, while responding to appeals from developers to appeals against variation 2, the Environment Court decided to remove this rule.
The council regularly reviewed the effectiveness of its planning rules, including heritage rules, and further changes to the 2GP could be expected in due course, Mr Mawdsley said.
The rule was still in place when TGC Homes received resource consent for the demolition of the three properties in Napier St and Kenmure Rd.
