The 29-storey scheme, which includes proposals for 142 homes and 88,600 square metres of office space in the area around Waterloo station, was granted planning permission by the London Borough of Lambeth in November 2012.
In June 2013, Westminster City Council and built environment conservation adviser English Heritage announced they were taking legal action against the government's decision not to call in the plans.
The council and English Heritage are concerned that the proposals would cause substantial harm to the setting of the Palace of Westminster, which together with Westminster Abbey forms a World Heritage Site.
In August it emerged that a Department for Communities and Local Government (DCLG) planning casework officer wrote to communities secretary Eric Pickles and planning minister Nick Boles saying the case was "finely balanced" and recommended that the application be called in for a public inquiry. However, Pickles and Boles ignored this advice and in March it was announced that the scheme would not be called in.
A DCLG statement issued in August said the decision not to call in the application "was made after a careful consideration of all the issues and representations. The proposed regeneration project was supported by the local council and the mayor of London".
Westminster City Council has welcomed today’s news. Robert Davis, deputy leader, said: "We are delighted at this development, because the council is committed to preserving the status of the Palace of Westminster as one of the world’s most important and most recognised World Heritage Sites.
"As we have already proven in the Victoria area of London, you can create areas for jobs, growth and enterprise – but it does not have to be at the cost of risking the nation’s heritage."
The leader of Lambeth Council, Lib Peck said: "This is extremely disappointing as it means further delays to a once in a generation opportunity for jobs, homes and investment in the area. Lambeth Council believes the Elizabeth House development is absolutely consistent with the government’s National Planning Policy Framework, it is fully supported by the mayor of London and will bring considerable economic, social and cultural benefits to the area."
A spokesperson from Elizabeth House said: "At a time when economic growth is absolutely paramount and with the localism agenda strongly in place, it is regrettable that the Elizabeth House regeneration will now be delayed while this case is heard and we remain committed to seeing these benefits realised."