Dublin City councillor Mannix Flynn has been given permission by the High Court to seek to quash a decision to develop a family hub for homeless people off Aungier Street.
The challenge is over the council's plan, in partnership with the Peter McVerry Trust, to convert a former tourist hostel at Avalon House, Whitefriar Street, into a hub for 25 individual family units.
The council's original plan was for an emergency hostel for single people but, the court heard, that was dropped after facing local opposition.
Mr Flynn said the council failed to comply with legal requirements and planning laws. It was done without oversight, planning control or notification to interested parties.
It also failed to adhere to its own development plan, including a provision that there should not be too many institutional-type facilities in one area, he said.
There are seven other institutional-type facilities within an 800m radius of Avalon House.
There were rumours about the hostel plan last summer but it was only after questions from Mr Flynn that details of the council entering into a lease with the McVerry Trust came to light, he said.
The lease is to be for 20 years at €2m per year, he said.
The process adopted by the council and the McVerry Trust "has at all times been characterised by secrecy", an absence of transparency and a failure to notify interested parties about decisions, Mr Flynn said.
The failure to disclose information and notify the area's elected representative was "peculiar and disturbing", said Mr Flynn's lawyer, Paul Gallagher.
Mr Justice Charles Meenan was satisfied with the grounds to allow a judicial review.
He said the background was the homelessness crisis - which he described as "probably the most serious social crisis facing the authorities" and that the case should come back in two weeks' time.