Hundreds of council housing residents in west London are celebrating after councillors agreed to take forward compulsory purchase order plans that could halt one one of the largest luxury developments in Europe.

The West Kensington and Gibbs Green council estates are home to more than 2,000 people. For more than a decade, the residents have lived with uncertainty about whether or not they will lose their homes as part of a 31 hectare (77 acre) development in Earl’s Court by Capital & Counties, known as Capco, a FTSE 250-listed company. The developer has planned a £12bn redevelopment of the site and refers to the project as its Earls Court Master Plan.

Two large exhibition centres in the area have been demolished to make way for the redevelopment and the plan is to build luxury homes and other facilities on the site, with a small proportion of homes available at affordable rents.

Capco has told the council residents that their homes will be replaced as part of the redevelopment with like-for-like properties. But the residents say they are happy with the homes they have now and do not want their community to be disrupted by a major building project. The residents want both estates, which they have called “people’s estates”, to remain in public ownership.

The compulsory purchase order plans were given the green light at a meeting of Hammersmith and Fulham council. The order will not cover the entire site but earmarks 8.2 hectares. If the order is secured, it could effectively block redevelopment of other parts of the site.

Council residents welcomed the decision. “We feel as if we have been holding our breath for the last 10 years and now we can breathe again,” said Sally Taylor, 58, a retired nurse. “Our estates are lovely places to live and we want them to remain as council homes.”

The residents have worked to provide a range of services on the estates including a youth club, services for older people and £1-per-hour yoga classes. They have increased the green spaces on the estate and nurtured a nature garden and allotment raised beds.

“This decision is just brilliant. It keeps hope alive and makes us feel that people are taking notice of us,” said Taylor. “This isn’t just bricks. It’s our homes and our community.”

Facebook Twitter Pinterest Residents have worked to provide a range of services on the estates. Photograph: Graeme Robertson/The Guardian

The residents take pride in their estates and are determined they will be safe and pleasant places to live in. They have their own ways of driving out any drug dealers who try to come on to their estates.

“Sometimes dealers try to hide their drugs on the estates,” said another resident, who did not want to be named. “We pour bleach over the drugs to destroy them. They try to groom young kids to carry their drugs and hide them around the estate underneath pieces of toast in plant pots. We go around putting toast everywhere so the kids get confused and can’t find where the drugs are hidden.”

The Earl’s Court scheme was agreed with Capco in September 2012 when Hammersmith and Fulham council was under Conservative control. Labour took over the council in 2014 and has always opposed the redevelopment plans, which include four urban villages and a high street designed by the architect Sir Terry Farrell.

The property market is much less buoyant than when the scheme was first devised and the site is now valued at considerably less than the original £12bn.

The Grenfell Tower fire has also changed the public discourse about social housing. Part of the land on which Hammersmith and Fulham plans to issue a compulsory purchase order is in neighbouring Kensington and Chelsea and the plan is to build a large number of social housing units on this land.

Hammersmith and Fulham council said it had taken the compulsory purchase order decision to “unblock the stalemate” over the site. A report to the council said that although Capco had promised a range of improvements to the area including 7,500 new homes, very little had been done. “The project has completely stalled over the last six years with only the demolition of the exhibition centres taking place,” the report said.

The leader of Hammersmith and Fulham council, Stephen Cowan, said: “When markets fail, the public sector must step in. That’s precisely what we’re doing with the biggest compulsory purchase order in modern history in order to deliver much-needed homes and economic activity on the site.”

A spokeswoman for the Earls Court Partnership Ltd, of which Capco is a part, said: “Earls Court Partnership Ltd is advised that London borough of Hammersmith and Fulham has not demonstrated that they have a credible position in relation to the compulsory purchase order, a process which is only likely to slow down the Earls Court scheme and delay the range of public benefits that could arise from the opportunity area.”