The most common and most likely answer to this crossword clue is the 7 letter word RESIDED
I've seen this crossword clue in The Daily Telegraph
R
E
S
I
D
E
D
More clues leading to the result RESIDED
- Settled group covered in embarrassment
- Lived or died struggling to follow religious instruction on Sabbath
- Desired building once lived in
- Lived as desired, after a revolution
- Was dwelling given new walls?
- Settled for having team in scarlet
- Around rim, claret settled
- Note: took a stand; lived
- Stayed with socialist, taking direction
Buddy explains!

The straight part
We know that "Was dwelling" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case was dwelling = resided.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does RESIDED mean?
RESIDED verb- To dwell permanently or for a considerable time; to have a settled abode for a time; to remain for a long time.
- To have a seat or fixed position; to inhere; to lie or be as in attribute or element.
- To sink; to settle, as sediment.