DSE last month announced it would evict the 21 tenants because Caledonian Caravan Park did not comply with its land-use policy.

Residents found solace in a community plan, endorsed by the council, to turn the park into a low-cost, sustainable village.

But mayor Pat Griffin said at a meeting last Thursday the DSE remained adamant that the July eviction deadline would not be extended.

The DSE will give local businessman Paul Tatchell, who spearheaded the eco-village campaign, the chance to present a business plan in the first week of March.

"What government would let a place close if there is a viable option that doesn't cost them anything?" Cr Griffin said.

"Where [DSE] falls down, is how they work with human beings. We're talking about people's lives. This isn't something in their skill set. Their job is to manage assets."

Mr Tatchell said he remained confident the proposal would be accepted.

"We've had enormous support and have put a lot of time and effort into this. This will all cost less than it costs now."

Mr Tatchell said he was heartbroken for the residents, some of whom have been living in the park for 10 years.

He said tenants were becoming "extremely anxious" at the prospect of becoming homeless or moving to remote areas.

DSE regional director Laurie Dwyer said it was working with the Department of Human Services and UnitingCare to help residents find new accommodation.

He said the park would close on July 25.

The DSE would consider the eco-village proposal once it received it.

Alicia Byrne, a spokeswoman for Housing Minister Wendy Lovell, said there were 2836 public and social housing properties in the region serviced by the Ballarat housing office.

The area stretches more than 300 kilometres from Bacchus Marsh towards the South Australian border, to towns like Jeparit.

Ms Byrne declined to specify the number of public houses available in Ballan.

A DHS spokesman said 995 people were waiting for housing in the Ballarat region as of December.

A community meeting to discuss the eco-village plan will be held at the council offices in Stead Street at 7pm on Thursday.