The Kiama Arts Centre Committee was formed in 2012 to help develop an arts centre for the area, following frustration expressed by the community that Kiama lacked a dedicated multi-function cultural centre.

In 2013, four potential sites were identified.

They were the Old Fire Station, the Joyce Wheatley Community Centre, the old police residence on Terralong Street and the council's administration precinct.

Kiama Mayor Brian Petschler said revitalising the existing community centre and adding a cafe and shop to the Old Fire Station was deemed the best option.

"We have an established arts centre in the Old Fire Station and we have a somewhat under-utilised community centre," Cr Petschler said.

"There is a stage in Hindmarsh Park between the two properties so there is an arts precinct of sorts there."

Cr Petschler said work on the community centre would depend on moving staff elsewhere, most likely to the Kiama Hospital site.

The old police residence overlooking Kiama Harbour, was viewed as a site with many benefits.

Cr Petschler said there were structural and heritage issues with the property, which had been neglected for many years.

The cottage dates back to the 1860s when it was built as a jail. It was converted to a residence more than 100 years ago.

The building is subject of an Aboriginal land claim lodged in 2005. The claim has prevented the NSW Police Property Branch from restoring the property.

A council assessment of the site said the long-term viability of the property was doubtful due to the uncertainty surrounding its ownership.

Kiama MP Gareth Ward said he would love to see heritage building issues resolved, but the claims process was a legal one that needed to be worked through. Efforts to contact the Aboriginal Land Council for comment have been unsucessful.