Officials at the Royal Borough said funding was no longer available for inspectors to check that planning permission conditions were being adhered to.

The spotlight has been turned on the borough’s planning system following the controversial granting of retrospective permission to turn a building into a homeless hostel on one of Greenwich’s prime residential streets.

Greenwich council granted retrospective permission late last year to divide a two-storey building on Ashburnham Grove into 26 studio flats – some as small as 154 sq ft – housing 26 vulnerable adults and seven children.

Greenwich planners over-rode local objections on the grounds that the development would provide accommodation for local homeless people with a focus on women and single mothers.

The council has now confirmed it cannot meet the terms set by developer Grosvenor Hill Social Impact Group to house homeless Greenwich people.

A Council spokesperson said: “The council has discussed this matter with the owners and after careful consideration are presently unable to provide housing for our clients at these premises.”

The property remained empty for several months after planning permission was granted.

But last week local residents were concerned to witness a sudden influx of mainly single men moving in to the property.

One resident told the Enquirer: “The council seems to have completely lost control of this.

“The developer only got planning permission after they had done all the conversion work and everyone was told there would be strict controls over who would occupy this building and how it would be managed.

“It then stood empty for months and now Greenwich can’t afford to use it for local homeless people.

“Now overnight a group of people appear and no-one seems to know who they are or where they came from. We as local residents have been kept completely in the dark despite repeated requests for updates from the council.”

A Council spokesperson said: “The council sets out conditional planning permission. We expect owners to comply with the approved planning permissions. The permission granted was for supported accommodation for vulnerable individuals with low to medium support needs.

“Making sure people have access to safe and affordable housing is a priority for the Royal Borough of Greenwich, and the planning and development process is a crucial part of addressing the housing shortage we are facing. But that doesn’t mean the standards of housing should be compromised and breaches in planning permissions will not be tolerated.

“Unfortunately, we just do not have the funding available to follow-up with development inspections when a planning permission is implemented.

“Therefore, our resources to enforce this rely on people reporting unapproved or unauthorised development and use of property.  Planning enforcement are investigating this matter to establish if the use falls outside the permission granted and the implications of this.”