The Uxbridge Arms pub on the Rockingham Estate is to be redeveloped after Southwark Council agreed to sell the site.
Cllr Fiona Colley, Southwark's cabinet member for resources, told a cabinet meeting this week that the proceeds of the sale would help to fund repairs to council homes as well as the construction of new properties.
"We currently own the freehold of this building and we are proposing to sell it to the long leaseholder who has a 20-year lease," she said.
Cllr Colley added: "One of the things that I was very concerned about ... is that we should retain the amenity use of a pub.
"What we are proposing is that the contract will require that there is a reprovision of that A4 drinking establishment use in the new development.
"The purchasers are planning to do that anyway but I was keen that we have that in the contract.
"I think it's very important for the local area that we retain places where people can meet and socialise."
Council leader Peter John said: "We wouldn't want to be encouraging the consumption of alcohol necessarily, but we would want a community resource where people can meet."