It has been home to some of Britain's most notorious murderers. Now Broadmoor hospital, the country's best-known high-security psychiatric hospital, could be sold off to developers and converted into a hotel or luxury flats.

The Victorian buildings, which house 260 of the most dangerous and violent patients, may be transformed with the inmates' old rooms being turned into apartments or hotel bedrooms. The money raised by the sale would help to pay for a new psychiatric hospital for male patients, among them Peter Sutcliffe, the Yorkshire Ripper, Steve Wright, the Suffolk Strangler, and Rachel Nickell's murderer, Robert Napper. It is anticipated that the new hospital would cost around £288m.

A spokesman for West London Mental Health NHS Trust, which owns the 53-acre Broadmoor Hospital site near Crowthorne, Berkshire, said: "We have plans to build a new hospital alongside the existing Broadmoor site. These plans are currently with the Department of Health. Buildings and land in the current hospital complex which were no longer needed by the NHS could be sold. A possible buyer might wish to adapt the buildings for a number of uses – which might involve hotel or housing facilities – but there would be planning constraints due to some of the buildings being listed."

The plans were drawn up in 2003 but await final approval. The provisional completion date of 2016 could be pushed back to 2023 because of the credit crunch.

Concerns have been raised about the standards of care at Broadmoor for 20 years. In 2003 the hospital was described as "totally unfit for purpose" and lacking "basic standards of dignity and privacy" by the Commission for Health Improvement. Hospital bosses were under pressure to improve facilities after the suicides of three patients in 18 months – including the death in 2007 of the "Freddy Krueger killer" Danny Gonzalez, who wondered what it would be like to be the villain from the Nightmare on Elm Street horror films, and went on a three-day rampage in September 2004 killing four people and attacking two others.

Last summer, a report by the Care Quality Commission (CQC) into the West London Mental Health Trust that runs Broadmoor painted a grim picture of an institution blighted by weak management, poor staffing and training, inadequate facilities and overcrowding. The hospital had been forbidden from removing window bars used by patients to hang themselves because the building was listed. Between 2001 and 2008, there were eight suicides, five by hanging.

Broadmoor Hospital was the country's first purpose-built asylum for the criminally insane, opening in 1863 after the creation of the Criminal Lunatics Act 1860, also known as the Broadmoor Act. Its patients have included Roderick MacLean, who attempted to assassinate Queen Victoria in 1882. He was sent there after being tried for high treason and found "not guilty by reason of insanity". Dr William Chester Minor, a former US Army physician, spent 38 years in the hospital after killing a man outside his house in London. While staying there he sent thousands of pages of information to the first Oxford English Dictionary. More recently its inmates have included the Moors murderer Ian Brady, Charles Bronson – known as the "most violent prisoner in Britain" – Ronnie Kray, and Kenneth Erskine, known as the Stockwell Strangler.