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McAuley House was established by the Sisters of Mercy in 1942 (Catherine McAuley founded the Order in Ireland in 1831).
The Sisters saw the need for an institution for former residents of their orphanages to live when working in Melbourne. McAuley House had accommodation for 15 young women.
The hostel was closed and the property sold in 1965. The proceeds of the sale were used to establish a replacement hostel at 19 Glyndon Avenue, Brighton.