Overcrowding is a common issue in Pearse House in Dublin city centre, where several siblings, some aged in their late 20s, share cramped rooms at night.

Those living in the flat complex on Hanover Street have spent years believing that work on plans to regenerate and amalgamate the flats, which would result in more space for residents, would begin this year.

Some recalled viewing designs and models with excitement in recent months. But about three weeks ago they learned that the planned regeneration of the complex, built in the 1930s, was in jeopardy as the Department of Housing has refused to fund the project.

Under the proposals, which date back to 2018, the number of flats in Pearse House would be reduced from 345 to between 215 and 275, with a view to increasing the size of the living spaces, which do not meet minimum standards.

Pearse House: Under plans dating from 2018 the number of flats in the complex would be reduced to give more space to remaining dwellings. Photograph: Tom Honan

However, the department has said it is “not in a position to support proposals that would result in a significant loss of homes”.

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Joanne Lawless (40) lives in a two-bedroom flat with her husband and six children, who range in age from eight months to 24 years. Their home was earmarked for redevelopment under phase one of the proposed project.

“I have four kids in one room, I have my baby in with me and my husband. And my daughter, who’s five months pregnant, is on a blow-up bed. It’s very stressful,” she said.

The proposal to increase the size of their home, which would have meant the family being among the first to be moved, with the option to return once the work was complete, “was our hope of getting a bit more space”, she said.

Her husband, who is studying at Trinity College Dublin to become a teacher, informed her several weeks ago that the plans were at risk.

“It was devastating. My kids were crying. They thought they were going to get a bigger bedroom or somewhere to study,” Ms Lawless said.

“My heart shattered. It made me go into some sort of depression; I still feel that way now. I feel devastated. There’s no hope for us,” she added, standing outside her home. “I just need space.”

Neil Maloney, a lifelong resident and chairman of the Pearse House Residents Association, described the news as “gut-wrenching”.

Pearse House, on Hanover Street in central Dublin, was built in the 1930s. Photograph: Tom Honan

“We had high hopes after seeing the model and the design before Christmas, and I know Dublin City Council are willing to push this ahead as much as they can,” he said. “But for the department to pull the rug under them like that is absolutely scandalous.”

In his flat, Mr Maloney and his wife share a bed with their daughter, while their three sons share a second bedroom. He described their living conditions as “claustrophobic”.

Jacqueline Hanevy (55), a Pearse House resident for more than two decades, said many people in the complex are living with significant mould issues.

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“They can’t put plasters over Pearse House any more,” she said. “It’s starting to crumble and something needs to be done.”

A 46-year-old mother of three, who did not wish to be named, pointed to dark blotches of mould on the wall of the bedroom in which her two sons and daughter sleep.

On hearing of plans to regenerate Pearse House, one resident said she 'finally felt we weren’t forgotten'. Photograph: Tom Honan

“The eldest is 22, he’s autistic, and I’ve a 20-year-old and a 14-year-old who’s asthmatic and they’re sharing a space with that mould,” she said.

On hearing of the plans to regenerate the complex, she said residents “finally felt we weren’t forgotten”.

“We felt that somebody actually cared about the residents of Pearse House, somebody was going to make a change and make it better, that they valued the people that live here,” she said.

Now, she adds, it feels “like we aren’t worth it”.