Calgary-Klein MLA Kyle Fawcett says the province is pulling $5 million in funding from the Drop-In (DI) Centre's proposed housing project in the northeast.

The centre wants to turn an old Quality Inn near the northeast communities of Thorncliffe and Greenview into a transitional housing complex.

Fawcett says the DI Centre has failed to meet a provincial grant requirement to include a certain number of rental units at market rate in the building.

"So this more a matter of accountability of public taxpayer dollars than anything else," he said.

The executive director of the Drop-In Centre says she has not heard directly from the minister of Municipal Affairs about the grant money.

Drop-In Centre room

The Calgary Drop-In Centre wants to turn a hotel in the northeast into transitional housing units as seen above. (CBC)

Debbie Newman says this project will go forward with or without the money or backing from the communities.

"There is no reason why this project should not go ahead. There has to be a way around community buy-in," said Newman.

Opposition continues to grow

There are concerns from people in the area that the housing project will create a high concentration of low-income housing.

Fawcett says the requirement to include market rent units can be waived with community support but the project has met with opposition from the community since it was introduced two years ago.

Ward 4 Coun. Sean Chu is critical of the DI Centre for the way it has engaged people in the Greenview community.

"The community think that, in a way, the Drop-In Centre did not deal in good faith," said Chu.

Calgary's Tim Richter, the president of the Canadian Alliance to End Homelessness, is questioning whether a transitional housing complex is worthwhile.

"The plan to end homelessness is designed to create permanent housing and it prioritizes people who chronic and episodically homeless. This project is neither."

The Drop-In Centre applied for its development permit on Monday but Richter says given the level of local opposition, he doubts it will go ahead.