The plans, submitted to East Lindsey District Council by Mr Neil, called for permission to build 13 flats and two commercial units on Sharpley’s Court and Horton’s Yard – off Pawnshop Passage.
They will also see an existing building at the rear of the car park expanded and converted into a single storey home.
The proposals will leave five on-site parking spaces, accessed from Kidgate.
The apartments will be one and two bed, and at its highest the block will be three storeys.
The developer said the addition of the shops along Pawnshop Passage aimed to avoid conflict with patrons leaving the Joseph Morton pub opposite.
Following comments, the applicant had amended the plans to change the size and shape of windows on Kidgate.
Councillor Sid Dennis said: “I think it will be a real betterment to our area to be honest. I think it would fit in very nicely and clean the job up.”
Councillor Alex Hall said it would be a “great opportunity”, while Councillor David Hall said: “The area is, quite frankly, a carbuncle and very overgrown.”
Louth Town Council and Louth Civic trust had objected to the plans along with a number of objections from nearby residents.
There were worries over the size of the development and its impact on the appearance of the local street scene.
Councillor Terry Aldridge said: “I don’t think its a good idea. There will be overshadowing, it’s overbearing – I agree it’s a bit of a mess at the moment but I don’t think it’s the right place to have a development.”