A public inquiry into the refusal of planning permission for Guy's and St Thomas' Charity's Founder's Place development opened at Lambeth Town Hall on Tuesday.
The scheme includes 641 residential units (some reserved for key workers) and a new Ronald McDonald House for families of patients at the Evelina Children's Hospital. The buildings – which would replace Canterbury House and Stangate in Royal Street and the Holy Trinity Centre adjoining Archbishop's Park – would range in height from 5 to 20 storeys.
Lambeth's planning committee rejected what they described as an "oppressive and overbearing development" that would "harm the setting of [Archbishop's] Park thereby failing to preserve the character and appearance of the Lambeth Palace Conservation Area".
The inquiry, presided over by planning inspector Philip Wilson, is expected to sit for nine days over three weeks. The inspector will then make a recommendation to Ruth Kelly, secretary of state for communities and local government.
In his opening submission Russell Harris QC, for Guy's and St Thomas' Charity, described the site as "one of the borough's most important ... brown field sites".
Mr Harris told the inspector that the "truly massive" benefits of the development would transform "a uniquely and shamefully underused and socially deprived area".
The charity argues that the benefits of the scheme far outweigh the loss of the historic Holy Trinity Centre building and that the new development "enhances the character and appearance of the application site and the conservation area".
Stephen Hockman QC responded on behalf of Lambeth Council: "...it is our submission on behalf of the council that there were good grounds to refuse planning and conservation area consent".
Mr Hockman explained that the council's case will concentrate on issues of design and conservation. He stressed that the council does not oppose the principle of a large-scale development on the site.
The council contends that the demolition of the Holy Trinity Centre and other buildings north of Archbishop's Park "would have an adverse effect on the character and appearance of the [Lambeth Palace] Conservation Area".
The authority also has concerns about the height and footprint of the buildings, described as "oppressive and overbearing" by the members of the Planning Applications Committee who refused permission for the development in April 2006.
Witnesses expected to appear for the appellants include Guy's and St Thomas' NHS Foundation Trust chief executive Sir Jonathan Michael and architect Sir Terry Farrell.
The inquiry will also hear representations from the Canterbury and Stangate Tenants' Association, whose members stand to be rehoused in new accommodation if the development goes ahead.
Later Southwark and Lambeth's London Assembly member Valerie Shawcross will speak in favour of the development and Vauxhall MP Kate Hoey will speak in opposition to the charity's plans.