Current rules allowed for small owner-operated "home occupation" brothels - but no more than four people could work in the business, which could include two who didn't live there.
"We are not happy at all about having a brothel in our street," said one neighbour, who did not want to be named.
He claimed a council officer he spoke to told him it was "impossible to say" whether there were one or 10 people working there because "all the Asian sex workers looked the same".
Steve Pearce, the council's regulatory compliance manager, said he has not been made aware of any complaints about the conduct of staff during investigations into the property.
"However we certainly do not condone behaviour of that nature."
Another neighbour, a father with a 10-year-old daughter, said he no longer felt safe letting the girl play in the yard or walk down the street.
"She's asking me if she can walk to school on her own but I don't feel safe letting her do that," he said.
"Traffic and parking has also become somewhat of a nightmare. We're a cul-de-sac and cars would just be driving around looking for the brothel."
The man said "strange characters" had appeared on the once-quiet residential street since the brothel opened.
His wife had been in touch with both the council and police, and was working with other neighbours in gathering more evidence.
They were hoping to shut the brothel down, or get it to move to the Northcote or Highbury business areas.
It was just after 11am on a Friday when the Herald went to the street, and at least five men were seen coming and going from the property in less than half an hour.
The house had a high-wooden fence with the curtains fully drawn. A sign on its front gate said "opening hours 8am to 7pm".
A young Chinese woman dressed in pink lingerie answered the door when we rang the doorbell.
She went to get another woman to talk to us.
The woman, who gave her name as Candy, denied the house was being used as a brothel but that it was a rental accommodation for international students.
Candy said she knew the landlord only by her first name and she was not available for comment.
Pearce said investigators had met with the tenants in June to discuss unitary plan rules.
They had talked about how many employees were allowed, he said, and also that the business could only operate between 7am and 7pm.
"Following our initial investigation, advertised hours for the business were changed and the business confirmed that they otherwise complied with the Unitary Plan requirements," Pearce said.
"We have received further complaints in late July, which we are currently investigating."
However, one neighbour told the Herald she believed the business operated late into the night "judging from the cars that come and go".
Residents on the street often faced parking problems when they returned home from work in the evenings, she said.
"And it will continue to be bad right until close to midnight," she said.
