The £1m apartment block, funded mostly by the taxpayer, was built on edge of the Gas Works site near the Markets area in the city.
The owners of the development, Helm Housing Association, has claimed it was told construction could begin in 2007, but planning approval has not yet been granted.
Anna Lo, MLA for the area, said Helm Housing had acted irresponsibly.
"Helm Housing has been a well-established housing association, for them to ignore the procedures and to build without planning permission is totally scandalous.
"They may now face the consequence of having to knock it down, wasting taxpayers' money."
Minutes of a meeting at Belfast City state that the Environment Agency has indicated that they would recommend the planning application, for the social housing scheme, which has already been built, should be turned down.
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Ian Graham, Director of Development at Helm Housing, said construction started on the apartments after receiving two letters from the Planning Service.
"The letters indicated they were generally content with the proposal subject to clarification on a few technical matters that we have been addressing ever since," he said.
"I certainly would be confident that Helm have taken all the steps required during the construction and post construction with regard to the air quality monitoring that we have put in place, that will enable the Planning Service to issue full planning permission."
Northern Ireland Environment Agency is also seeking environmental assurances over possible contamination from the former Gas Works, according to the report.
The company is particularly concerned about a potential pollution risks to underlying water associated with the building.
The Housing Association, however, said it has met all the environmental concerns about possible contamination on the former gas works site.
The Social Development Minister, Alex Atwood said that the responsibility for the delivery of the Social Development Housing Programme was transferred from DSD to the Northern Ireland Housing Executive in 2007.
"I have been made aware today of the issues surrounding the site at McAuley Street," he said.
"I have asked for an urgent report to be forwarded to me by tomorrow and for DSD, Housing Executive and Helm Housing Association officials be available to advise me further on Friday."
(NS/GK)
