Plans for the estate regeneration were submitted by Clarion Housing Group, formerly known as Affinity Sutton, in July 2015 and refused by the Royal Borough of Kensington & Chelsea (RBKC) in November the following year.
The application proposed the demolition of 383 homes at the William Sutton Estate to make way for 334 apartments and nine mews houses within buildings of four to six storeys high. Of the new units being proposed, 237 would be socially rented homes.
Officers recommended the application be refused due to the "net loss of social rented housing", comparing the 383 socially rented homes on the existing estate with the 237 proposed.
They added that the proposed scheme would be of "insufficient high design quality" and "would fail to contribute positively to the surrounding townscape".
The decision prompted Affinity Sutton to claim the decision "prompts significant questions about our future ability and appetite to take on regeneration schemes in central London".
The firm lodged an appeal against the authority’s refusal, which was recovered by the secretary of state in May this year.
Changes to the proposed scheme during the appeal process saw the overall number of homes proposed rise to 366 and the number of socially rented units increased to 270.
According to the inspector's report, the council claims the floorspace of the existing estate is 18,706 square metres whereas the proposed development would deliver 16,142 square metres of social rented accommodation, equating to a 14 per cent loss of floorspace, or 38 per cent by unit.
Considering the appeal, housing secretary James Brokenshire dismissed concerns about design quality and advised that "the loss of the existing estate buildings is not a matter which weighs heavily against" the proposals.
He noted that the council, appellant and mayor of London have all agreed that demolition and redevelopment is the only feasible option for the estate.
However, he found that that the scheme "fails to satisfy the policy aims of no net loss of social housing and maximum reasonable provision" and therefore conflicts with the development plan.
"The proposed scheme does not comply with the policy aims of no net loss of social housing and maximum reasonable provision, contrary to the development plan and national policy," he concluded.
In July this year, new rules were introduced by the mayor of London which require estate regeneration proposals to be approved via a ballot of local residents.
In November, the first ballot was held and resulted in residents voting to approve plans for the demolition and reconstruction of the Westhorpe Gardens and Mills Grove estate in the London Borough of Barnet.