Community housing forms require applicants to disclose their convictions but council group manager property services David Bainbridge-Zafar refused to confirm details of the case, citing privacy issues.
"When Corrections and/or police impose restrictions on a person, DCC staff work with them and ensure the appropriate agency signs off on the suitability of a property before an offer is made to the tenant," he said.
In August last year, Hansen was warned by police for masturbating on the balcony of his flat.
But on January 20, he was at it again.
From outside his third-floor apartment he had a direct line of sight into the outdoor play area of the daycare centre across the road.
The director of the facility said the decision to house the man there was "just crazy".
"It was just an unnecessary risk for people in that environment," he said.
The director was confident in the centre's security protocols but hoped for some reassurance from the council that no-one with a similar background would be placed there in future.
The council refused to answer whether:
1. Any other residents at the Palmyra complex had sex or public-indecency convictions.
2. It had apologised to the daycare centre over the incident.
3. Any types of convictions precluded prospective tenants being given community housing.
The Dunedin District Court heard last week that Hansen was self-pleasuring inside his home before venturing on to the balcony.
One daycare staff member observed the spectacle and alerted others.
Another then yelled at Hansen, prompting him to return inside.
Court documents said the early childhood centre had about 40 pre-school-aged children on site at the time but they were inside having morning tea when the defendant was spotted by staff.
None of the children saw the obscene acts, it was confirmed.
When police arrived, Hansen told them he had committed the public indecencies because he was "bored".
He went outside, he said, because he did not want to "make a mess" inside his apartment.
Hansen was subsequently moved to another council flat in a southern suburb of the city but remanded in custody in April when he failed to turn up at court.
Counsel Alan de Jager argued he could be given another term of home detention, to be served at the new address.
However, Judge Jim Large called the behaviour "very disgusting" and said that would be an inadequate response.
"The only way to bring the message home to you is to sentence you to a term of imprisonment," he said.
Hansen was jailed for six months but is expected to be released next month because of time he spent locked up on remand.
