It is hard to suppress the satisfaction when national interest turns to a landmark in your own neighbourhood: in this case, the old Mallett, Porter & Dowd Ltd building at 465 Caledonian Road, Islington. Or, to be more accurate: what remains of the Mallet, Porter & Dowd building, erected in 1874, recently trashed by University College London and a student accommodation specialist, Mortar Developments. It has just won the 2013 Building Design Carbuncle Cup, the second such victory for its architects, Stephen George & Partners, vision: "Our architecture aims to touch the individual and lift the quality of our lives."

If there are nicer reasons for a building's celebrity status than its surpassing ugliness, at least this triumph, over some impressively ignoble contenders, acknowledges local disbelief when the scaffolding came down, at the sheer scale of developer cynicism. Since the venerable Mallett, Porter facade had been retained, presumably out of respect for its looks, expectations were moderately high, for once, for some evidence of architectural talent in this fast-developing corner of north London, or at least, for some attempt to link the old building's front to the student barracks, at rear.

Instead, were it not for the previous efforts of Stephen George & Partners, you might suspect 465 Caledonian Road of being some elaborate, professional joke at the expense of facadism, with a building created purely to expose the sentimentality of letting decaying frontages frustrate living creatives. Fine, the new building says to conservationists, you wanted to keep your crappy old facade: see how much you like it now we've used a few metal prongs to bolt it to a zinc-clad tenement and replaced the original pediment with an extra storey – how many people will actually look up and spot that this addition does not, even so, obscure the brand new construction that rears above, as well as to either side of the brickwork?

As it is, sullen locals must concede that it might have been preferable to obliterate Mallett, Porter & Dowd than to allow this abject hybrid, in which the windows of the old facade do not, to further comic effect, match up with those in the new building, lurking two metres of dark space behind.

But to a proud Stephen George & Partners, "the scheme has been meticulously designed to retain a locally listed building dating back to 1874". Moreover, with its determination to lift the quality of our lives, it is unimaginable that this company would compromise the wellbeing of the building's student inhabitants to make a satirical point about facadism. If, regrettably, over half the students with rooms at the front will see little or no daylight, due to the authentic Victorian brickwork that stands between their windows and the sky, then this vampire-friendly arrangement has been approved by University College London, which proposes to charge up to £730 a month, with special discounts for those living in eternal night yet to be announced.

Along with the building's "adverse visual impact", as above, inadequate daylight was one of the main reasons why Islington council refused it planning permission in 2010. Not long after, in a decision that will surely be a wakeup call to such architects as still consider human dignity to have a role in cut-price student storage, a Mr Terry G Phillimore, of the government's planning inspectorate, overturned local objections on appeal by UCL and Mortar Developments.

Although the immured outlook, for the most unfortunate residents, remained unresolved, presumably because aligned windows cost money, Mr Phillimore was persuaded that, since students would only use their rooms at night, "due to intensive daytime actitivies taking place at the university campus", the absence of both light and a view "would not be unacceptably oppressive". That the design, as well as being hideous, contravened the London Plan's advice, was not, a shortcoming, he said, "so severe as to make the accommodation unacceptable for the proposed purpose".

Given the planning inspectorate's evident disdain for London's building policy, ambitious developers may want to ask if student accommodation really needs to be above ground at all. Given this utilitarian precedent, some sort of aerated, subterranean complex of cells, along the pared down lines of the Cabinet War Rooms, even if it disobeyed the fusspot London strategists, might well satisfy the government's more chilled approach to undergraduate needs. Always provided, of course, that the students, like Churchill, are beyond the age when rickets are a factor.

If neither windowless citadels of aluminium panels nor efficient, underground bunkers seem likely to command much local support, the number of unwanted projects now being allowed on appeal by the government's planning inspectorate surely confirms that it is always better for a developer to bung in an application, however inept or unlikely, than it is to anticipate aesthetic objections, or finicking about rabbit hutch dimensions.

Who, for example, would have bet on planning success for a locally rejected 800-house development on a greenfield site adjacent to Stratford's Anne Hathaway's cottage? Particularly at a time when Eric Pickles regularly agitates about the evils of centralism and "top-down" planning, and thousands of acres of brownfield sites are known to be available, land-banked by developers? Plainly, localism and new housing do not have to be enemies. But courtesy of the same Mr Phillimore who has exposed the great, daylight myth in Caledonian Road, backed by the committed anti-dirigiste Eric Pickles, Stratford's district council recently lost to Bloor Homes and Hallam Land Management, in what the Conservative council leader, Christopher Saint, called a "sad day for Stratford and localism and a bitterly disappointing decision".

By way of further encouragement to developers, one Tory MP, Nick Herbert, recently declared, in a Westminster Hall debate, that, whatever Pickles might say, "localism is dead". A succession of colleagues endorsed his loathing of the planning inspectorate, and its interference in their constituencies. "If I were asked to design a body with the specific goal of alienating and enraging communities," said Andrew Bingham, the member for High Peak, "I do not think I could do better."

Helpfully for Eric Pickles, if he were asked to design a body with the specific goal of enraging everyone excluded from property ownership, he could not do better than this group of privileged Tories, of the type so easily caricatured as nimbies, and as such, his sidekick, Nick Boles, likes to suggest, much more to blame than Britain's caring property developers for the housing shortage.

Having talked up localism, Pickles and Boles are now redefining this principle as a legal duty on local authorities to supply affordable homes on demand , a mission that becomes more pressing as their own administration's Help to Buy scheme creates an insane housing bubble. How will they look, all these compulsory Picklesvilles? With the planning inspectorate adjudicating the countless appeals to come, its decision in the case of Islington council vs UCL's carbuncle must give a strong flavour of the kind of quality we can expect.