Opponents of the development included the then-Mayor of Wellington Andy Foster, film-maker Peter Jackson, some businesses and some Māori.

In November 2020, the Wellington City Council agreed to sell and lease land to the development, against the wishes of mayor Foster.

Te Papa staff have estimated that about half of the penguins in the region use the harbour mouth alongside Mirimar Peninsula during their breeding cycle.

In 1886, the Crown requisitioned the land for defence purposes under the Public Works Act, and in the following years, became the site for an anti-submarine mine depot.

[11] This was a part of the major build-up of New Zealand's coastal defences during the late Victorian era, due to hostilities and fears of a Russian naval attack.

Their task was to maintain harbour defence mines to fend off potential attacking Russian Navy ships if they arrived through the inlet towards the city.

[4] In 1907, the base was transferred to the Royal Navy,[14] which constructed a new wharf along with munitions stores and an aerial tramway into the side of Mount Crawford, with limited use during The Great War.

[10] In 2000, under the name "Art Base", 28 resident artists called for the bay to become a cultural centre with students, a café, gallery and studios.

The incorporated society offered to talk with the Wellington Tenths Trust about these plans but the Office for Treaty Settlements had put the land aside.

[15] The settlement included the right to buy the Shelly Bay property (as well as several other around Wellington) and the iwi chose to do so at a cost of at least $13.3 million.

This dispute went to the Environment Court which ultimately resulted it being zoned suburban but with a proviso that development should be done to protect the character of the area.

The project faced legal, bureaucratic, and other barriers[28] and was controversial; news site Stuff reported that it wrote about 400 articles on Shelly Bay between 2011 and 2019.

[29] A 2018 Court of Appeal decision quashed that resource consent, saying that the Council wrongly interpreted law when it decided to grant it.

Much of the land, which was officially owned by an entity called Port Nicholson Block Settlement Trust (PNBST), was sold in June 2017 for $2 million, less than the iwi had paid for it.

[35] In December 2019 PNBST announced by a newsletter to Taranaki Whānui members that it was aiming to become involved again in the Shelly Bay development.

[36] A later agreement, made in 2021, established that the iwi will have a greater stake in the development project than previously proposed, including owning all commercial assets and securing a “distinctive” presence in the area.

[37] In November 2020, starting as "a one-man stand" by Anaru Mepham,[38] Mau Whenua began an occupation of Shelly Bay, putting up tents.

[39][40] Several councillors said that it was disgraceful for the mayor to support opposition to a council decision, though Foster said he thought he was attending a "community gathering".

In November 2021, Taranaki Whānui served the occupiers with an eviction notice; other groups calling for an end to the occupation included two local marae.

Councillors had voted in favour of the sales and leases in September 2017 and granted Council chief executive the power to do so, but after the issues with the resource consent and disputes over whether councillors had all the correct information, council chief executive Kevin Lavery refused to make the transaction and indicated in 2019 that the matter would likely go to a new vote.

Director Peter Jackson opposed the development, describing it as a "precious green space" threatened by "Soviet-era apartments".

[49] In 2020 the central Government announced a $3 billion infrastructure fund to restart New Zealand's economy following the coronavirus pandemic.

Ian Cassels applied to the fund, saying the Shelly Bay project was "shovel-ready", while lawyers for Fran Walsh and Peter Jackson implored Government ministers to reject the application.

Jackson and Walsh said the area is a "wonderful coastline that holds a great deal of cultural and historical significance", and added "we are looking forward to restoring the natural beauty of the bay.

"[51] Journalist Tom Hunt attributed the failure of the development to rising construction costs and interest rates, exacerbated by the fire.