The Drimnagh Residents Association issued the warning to Dublin City Council during a meeting at the Mansion House on Monday.
Under plans announced by Mr Kelly earlier this year, 500 modular houses will be built by next summer including 22 units to be opened before Christmas. The homes were meant to provide people at risk of homelessness with places to stay in a bid to address the deepening housing supply crisis.
However, at a meeting on Monday, the Drimnagh Residents Association told the council that 29 houses due to be built on an empty site on Curlew Rd in the area cannot go ahead as the location is already due to be the location of elderly care homes.
Speaking to the Irish Examiner, the association’s chairman Peter Burke said that the site was given to the council by the Sisters of Mercy in a “cut price” deal in 2007 — on condition the elderly would benefit from new homes.
Mr Burke said this plan was formally agreed with the council eight years ago, but that due to the recession no elderly care homes have been built.
He said while the council initially tried to claim no such deal existed and that it can push ahead with the measure.
However, Mr Burke said that on Monday the residents’ group was given confirmation that the deal exists — and said while no decisions have yet been taken “we reserve the right to consider judicial review” if the agreement continues to be ignored.
“It is just a ludicrous situation. Them saying this [the modular houses] is not illegal is just bluff,” he said.
As a result of the meeting on Monday, the council has set up a consultation group to examine the situation further.
However, a spokesperson for the local authority said despite the legal stand-off over the site there is “no delay anticipated”, with modular houses still expected next summer.
The development is the latest snag to hit Environment Minister Alan Kelly’s modular houses plans, after protests at a separate site in north Dublin were followed by heavy rainfall at the weekend, delaying construction work.
Last week, Mr Kelly said he is still hopeful as many of the planned 22 units before Christmas will be in place on time.