The Churchtown Residents' Association in Dublin is threatening to sue the Eastern Health Board over its purchase of a £113,000 house to accommodate children in care.
It says the health board failed to consult local residents over the purchase a house in Barton Road East to accommodate four brothers and sisters aged between three and 12, with eight carers and a manager.
Relatives of two elderly women living either side of the house say they will seek compensation unless the decision is rescinded.
The residents' group say they fear possible devaluation of their homes and possible impact on their lives because "of all the comings and goings". The chairman, Mr Ian Epstein, said they would be taking the case to the Ombudsman claiming the health board had breached its own procedures.
An EHB spokeswoman said the board would confine use of the house to that "of a family group home". An EHB meeting last night referred the issue back to the budgetary working group.