Application to knock through homes to create lavish 17-bedroom palace has been refused by planning officer due to borough’s homes shortage

Qatar’s royal family may have snapped up Canary Wharf for £2.6bn this week, adding to its London portfolio of Harrods and the Shard skyscraper, but the Gulf billionaires’ property spree has finally run into a dead end – a humble town hall bureaucrat.

In a rare act of resistance against the tide of Qatari petro-dollars that has swept through London’s property market, a planning officer at Westminster city council, Matthew Rees, has said the family’s plans to create a British palace worth an estimated £200m will be refused.

The Qatari royals had hoped to knock together two Grade I-listed mansions in Regent’s Park to create a lavish palace with 17 bedrooms, 14 lounges, four dining rooms, a swimming pool, a cigar lounge, a cinema and a juice bar.

The floorplan for the proposed £200m palace in Regent’s Park.

Blueprints suggest it was intended for the current or former emir and one of his wives. It includes a huge master suite with separate dressing rooms for the sheikh and sheikha, and a special eveningwear wardrobe and private fitting room for the sheikha. Children were to have the whole top floor to themselves – with lift access to a games room, a large pantry for snacks and various lounges.

But the council officer said no, citing an issue that matters to millions in the capital: the shortage of homes. He torpedoed the scheme in a dry official memo to the Qataris’ agents, which read: “Your development would lead to the loss of a housing unit which would not meet S14 of Westminster’s City Plan: Strategic Policies adopted November 2013.” He added: “Negotiation could not overcome the reasons for refusal.”

Paul Dimoldenberg, leader of the Labour group at the Conservative-controlled authority, said: “The stories about the mega-rich parking their money in Westminster have got to the point where even Westminster council is embarrassed at what is going on. There is no need for more multimillion-pound houses. The issue isn’t finding homes for the Qatar royal family or any other monarchy. We need to find homes for people on medium and low incomes.”

The Qataris’ agents had tried to head off the problem by offering the council £850,000 in cash towards its affordable housing fund. The council’s head of affordable housing had said the money could be put to good use in contributing to the construction or purchase of new affordable homes. But Rees said this was not permitted, and the decision stood.

Dimoldenberg pointed out that the Qataris’ offer would only buy one two-bedroom apartment in that part of the city.

“Houses containing a number of flats or homes shouldn’t be knocked through, and that is our policy,” said a spokesman for Westminster. “We need as many homes in central London as we can possibly get. It would now be up to the planning committee to decide [if] they agree with that.”

Qatari sources said they had yet to decide what strategy to take following the recommendation for refusal. They bought the homes for an estimated £120m in 2013.

Their designers, March & White – who also produce interiors for superyachts and have boasted of designing a “very special luxury residence in London for a confidential client” with dressing rooms that allow residents to use an iPad to select their clothes – declined to comment.

There is increasing sensitivity among Doha’s ruling elite to reputational damage caused by crass displays of wealth abroad by Qataris. Recent publicity about the lavish refurbishment of Dudley House in London by the current emir’s cousin, Sheikh Hamad bin Abdullah al-Thani, is understood to have caused particular concern among rulers.

The 33-year-old horse-loving prince reportedly filled it with museum-quality paintings and furniture, and the walls are hung with rare works by Gainsborough and Van Dyck. An article in Vanity Fair published this month reports how Sheikh Hamad “runs it like Downton Abbey”, with staff changing into white tie and tails at 6pm. It quoted him saying the Queen had been to dinner “a few times”.

“Qatar is being seen as very bling,” said one source close to part of the ruling family. “The view is that [this] needs to be brought under control.”

The plans for Cornwall Terrace in Regent’s Park were hardly less extravagant. Numerous majlis lounges were included, and staff were to serve guests their meals via a concealed door in the formal dining room that included decorative plaster mouldings and fabric panels. The previous timber floors would have been removed and replaced with herringbone oak floor with inset rugs, and stone walls replaced with white Carrara marble.

The application has now been withdrawn, which means it will not go before the council’s planners unless it is resubmitted.