London city councillors voted Tuesday against reducing the buffer zone between homeless encampments and residential properties, a move one councillor said could lead to conflict between homeowners and people who sleep outside.

"The tension I'm seeing in neighbourhoods is not good, and reducing the distance will probably boil over the kettle and I can't do that at this time," said Ward 1 Coun. Hadleigh McAllister.

McAllister was one of five councillors who did not support reducing the setbacks from 100 metres down to 25 metres. The setback adjustment was one of a handful of changes councillors spent more than four hours mulling over before voting to continue London's overall encampment plan.

City staff said the larger setbacks, which are more of a guideline but included in a city bylaw, have caused problems because they push encampments outside of more concealed areas and into open spaces. However, some property owners feel blindsided by any setback reduction, saying encampments in parks and other green spaces have had a negative effect on their quality of life.

A staff report recommended council reduce the setback to 25 metres, in part because the 100 metre distance was becoming difficult to enforce as encampments have grown and the setback reduced the available space where tents could be located.

Kevin Dickins, the deputy city manager overseeing part of the response to homelessness, said the setback has become a source of friction.

"It's shrunk the footprint so small it created competition for those spaces and put staff in conflict," he said.

Deputy Mayor Shawn Lewis also voted against reducing the setbacks, saying he's fielding complaints from Londoners who want more distance from encampments that in some cases are coming right up against property lines of homeowners' backyards.

"People do need to have safety and security in their homes respected," said Lewis. "That's something we continue to swing and miss at."

The motion to reduce the setback was defeated in a 5-11 vote.

Council on Tuesday also approved new rules for where the city can set up service depots, the mobile locations where basic services are provided such as portable toilets, food and water. Residents who live near the proposed service depot locations will have to be notified and consulted. Also, staff will have to spread future service depot locations evenly across the city, in response to complaints that downtown and east London locations are over-saturated with encampments and services that support people who sleep outside.

One big change coming to the city's encampment response is how it will be funded for the year starting Jan 1. Instead of the $2.2 million coming from a city reserve fund, it will come from a package of federal funding set aside to help municipalities deal with encampments, pending ongoing lobbying by Mayor Josh Morgan.

The money was announced by the federal government in the spring but it's yet to be confirmed for London, as Ottawa and the province wrangles over cost-sharing and other details.

Morgan told council on Tuesday he expects the money to flow soon.

However, the same funding source is being counted on to help the city keep open 90 overnight shelter beds operated by Ark Aid Mission. The city has extended Ark Aid's funding until the end of this year as part of its winter response. The shelter launched a petition for permanent funding on Tuesday. Ark Aid has pegged its annual operating cost at $4.2 million.

Coun. Steven Lehman echoed what Morgan and Lewis have been saying in recent weeks: That the city can't continue to pay for shelters and other services to support unhoused people on an ongoing basis.

"It's time to say enough is enough," said Lehman. "I'm supportive of this if we can find the funding where I believe it should come from."

The amount announced in the federal government's spring budget to help municipalities deal with encampments was $250 million, a share of which communities from across the country can apply to receive.

Whatever the final payment from Ottawa to London may be, Morgan said he's confident it's coming soon. Without it, Ark Aid could be forced to close its doors after Dec. 31, just as the worst of winter arrives.

"They've heard the call for urgency," said Morgan of the federal government. "They don't want to have made the announcement and not flow the money."