A controversial proposal to demolish one of Melbourne's largest high-rise public housing estates has been scrapped, angering those who wanted new smaller buildings.

The latest master plan for four public housing estates in Prahran was released recently, including plans to introduce private housing on the sites.

City of Stonnington Mayor Melina Sehr said she was disappointed by the plan to keep the towers, which were built in the 1960s and '70s.

"The buildings are aged and it would have been nice to have done something really amazing there for the community," she said.

Cr Sehr said the latest plan would leave less open space.

The master plan covers the Horace Petty estate which has several tall buildings (some reaching 16 storeys) and neighbouring estates on Bangs, Essex and King streets.

The plan to demolish the towers and redevelop the site was considered by the previous state government.

But Housing Minister Martin Foley said the towers would stay because the residents wanted to keep them.

"The residents who make these houses home have made it clear to me that they want upgrades but they also want to maintain their existing homes and the benefits of living close to the city," he said. 

Melbourne University geographer Kate Shaw said introducing private residents would not necessarily increase their interaction with the public housing tenants.

"The whole rationale for introducing the public private social mix on these sites doesn't stack up," she said.

Dr Shaw said the estates were "islands of public housing in seas of private housing".

She said it appeared the estates would lose three- and four-bedroom units to be replaced by housing for singles. Dr Shaw said there were many families on the public housing waiting list.

The former federal government provided the funding for the master plan to guide the estates' development for 30 years. The estates are home to about 1200 people.

Victorian Public Tenants Association executive officer Mark Feenane described the master plan as a "great example of forward thinking".

Mr Feenane said he was confident the consultation process would give public housing tenants, residents and businesses in Prahran an opportunity to have their say.

Friends of Public Housing spokeswoman Fiona Ross said the latest stage of the master plan came after the redevelopment of the Kensington and Carlton public housing estates.

"The outcome of these redevelopments was the permanent displacement of many of the original public tenants," she said.

Ms Ross said the displacements raised "serious human rights questions" about the rights of public housing tenants.

She said tenants should also be told about future changes to conditions and protections that tenants currently have in public housing.

Among the priorities for the master plan is that there be no net loss of public housing units across the precinct. 

Prahran Greens MP Sam Hibbins welcomed the decision to keep the towers to prevent disruption to residents.

But he said the priority for the project should be to increase public housing. Mr Hibbins​ said it remained unclear how much private housing would be installed on the sites.

"We don't have any detail about how that will play out," he said.

Opposition Housing Minister Tim Bull said: "After labelling it a secret sell-off agenda in Opposition, Labor has finally realised what an opportunity this renewal project offers residents.

A Department of Health and Human Services spokesman said there had been "varied community support" to remove the towers but some residents preferred they were retained. 

"The decision to retain and upgrade the towers was made with careful consideration of all feedback as well as the potential impacts on current residents," the spokesman said.

Total dwelling numbers have not been determined for the estates.

This article appeared in The Age on Tuesday 25th August and appeared online on Monday 24th August 2015.

Story by Benjamin Preiss State Political Reporter for The Age

Read   the story as it appeared online.