Millharbour Urban Village, a large-scale development near South Quay which would have provided 1,500 homes, has been rejected by Tower Hamlets councillors.

Developers Galliard Homes had prided itself on its close liaison with the community when drawing up the project but councillors went against the advice of officers and rejected the scheme after an earlier deferral.

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The plan comprised four buildings offering six towers, between 32 and 42 storeys, with public parks, schools, commercial space and 1,500 homes, 25% affordable – and it was the latter statistic that exercised the strategic development committee.

Core strategies and regional and local level demanded 35% affordable but developers are allowed some leeway in their "viability assessment" although, controversially, such an assessment is never available to councillors or the public, although it is scrutinised independently.

An artist's impression of Millharbour Urban Village

Cllr Shahed Ali referred to the neighbouring Maine Tower, which sold out within hours of being released on to the market.

He said: “I watched the circus of people around Maine Tower and it does concern me when I see young people and families who have lived here for years just standing by and watching wealthy foreigners pull up in their limos and cream off the flats from under our noses. No way can that help to enhance one’s self esteem or sense of belonging. It’s just disastrous.”

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However, as the provision falls within strategy parameters, it gives Galliard scope to appeal should the developer not wish to readjust the plan to appease the committee.

Councillors were told that a prospective resident would need earn £78,000 a year to take up one of the “affordable” three-bedroom houses.

The scheme had previously been deferred over a number of issues including the future of Lanterns Studio Theatre, which has been offered space in the development but at a commercial rent. Lanterns wants public contributions to make the space more affordable.

Councillors were told there had been a meeting between Lanterns and Galliard but no agreement had been reached.