The Gargoyle Wharf development on York Road would have been Foster and Partners' first major UK housing commission. It was approved by Wandsworth Council Planning Committee but was called in by the DETR.
The scheme became the subject of an article 14 planning directive, which prevents local authorities proceeding with a development without the approval of the secretary of state. Rialto withdrew the application on 24 March.
Scheme insiders said the proposal to redevelop the site fell foul of the DETR because it failed to allocate a proportion of the development to affordable housing.
A project source said: "We've heard rumblings that the lack of a social housing element caused problems for the government and led them to call the scheme in." Rialto Homes and Foster and Partners issued a joint statement confirming that the scheme had been withdrawn but declined to comment further.
However, the planning chairman of Conservative-controlled Wandsworth council, Ravi Govindia, said: "It's not our job to impose party political dogma on developers.
"This is a difficult brownfield site with a history of heavy industrial use and soil contamination. If ministers want these sites developed, they must resist the temptation to meddle." He added: "Apart from 696 new homes, we have lost the chance for a new police station, health facilities and hotel." A spokesman for Wandsworth council said: "We keep getting lectures on government brownfield development and when we bring a scheme forward the government slaps a 14 on it. It's ridiculous." The statement from Rialto Homes and Foster and Partners said the scheme had been developed following extensive consultation with the local council and the public, and would have provided public green space and riverside walkways.
It added: "In the light of what appears to be a transitional period of assessment of government policy on major brownfield riverside sites in London, Rialto Homes has decided that the application be withdrawn, and is currently considering its position with respect to the site at York Road." A spokesperson for the DETR Government Office for London denied that the decision to refer the scheme to the secretary of state contradicted the government's brownfield agenda.
The DETR spokesperson said: "There are lots of different criteria involved in schemes of this sort, and we need to ensure it is line with government policy."
