Former housing offices in Highbury could be turned in to 35 flats despite the town hall fighting to save business space in the borough.

Folgate Estates, who own the building, have submitted plans for prior approval to convert all six floors of the building, which is currently used by housing staff, in to one, two and three bedroom homes.

The plan to change the building from commercial to residential space cannot be blocked by the council due to the relaxation of planning laws by the government in May.

Last week Islington Council launched a legal challenge against the relaxed laws which it said seriously undermined the borough’s future economic prospects.

Council staff will vacate Highbury House and make a £1.9million move in to offices in Upper Street, Islington, and Cottage Road, Holloway - saving the town hall £1m a year in rent.

Councillor James Murray, executive member for housing, said: “The government’s change to housing is creating a reckless free for all so that you have office space being lost and businesses and small charities being evicted to make way for new residential properties.

“We have a very firm commitment saying that 50 per cent of all new housing must be affordable, but under these relaxed rules we can’t control what form the housing takes.

“From our point of view, when we can’t prevent rents and house prices from rising, it makes it even more difficult.”

The town hall lead a number of other boroughs in legal action against the government on December 4 and is awaiting the result of the challenge which it hopes will find the policy unfair.

Peter Trinder, an investment specialist acting on behalf of Folgate Estates, said that the plans were just one of many possibilities for the building.

“All the owner is doing is reacting to the relaxed planning laws,” he said.

“The architects who drew up these plans are working on a number of other potential outcomes including keeping the space as offices.

“What they’re [the owner] doing is looking at the options to make sure that if they’re going to invest a lot of money, it makes sense.”

Mr Trinder said that the company were also in talks with the council about helping develop the area on a larger scale, including helping TFL to provide step free access to Highbury and Islington Station.