Immortalised by the photojournalist, a decaying block of working-class flats is to become a cultural hub bearing his name

A squat, dilapidated house in southern Madrid that was bombed by the Nazis and immortalised by the photojournalist Robert Capa is to be preserved as a reminder of the suffering caused by the Spanish civil war and a testament to all those who have called its cramped rooms home.

No 10 Peironcely Street, which lies in the working-class district of Vallecas, had stood for just shy of a decade when it was pummelled by German bombers in the winter of 1936. In November or December of that year, the Hungarian war photographer recorded the damage done. His famous picture, shot on a Leica, shows three children sitting amid the rubble on the pavement outside the shrapnel-gouged house.

Eighty-two years later Madrid’s city council has said it will buy the house from its current owner so that it can be turned into a cultural space dedicated to historical memory.

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Announcing the preliminary decision last week, the council said it was the first time a building had won protection “not just for its status as an example of early 20th-century construction, but also because of its immaterial value and worth as a testimony of historical memory”.

Facebook Twitter Pinterest People still live in the shabby and deteriorating building of 10 Peironcely Street. Photograph: Nacho Guadano/ZUMA Wire/Alamy

More importantly, however, the council will also now seek to rehouse the 14 families who are squeezed into tiny flats in the shabby and deteriorating building.

Its residents have decidedly mixed feelings about No 10’s dual status as a beacon of the past and a constant reminder of the privations of the present. “We obviously know that this is a historical place but, for us, it’s just where we live,” said Cristina Uquillas, a 36-year-old waitress who lives there with her mother and two children.

Facebook Twitter Pinterest Hungarian-born photojournalist Robert Capa. Photograph: Hulton Archive/Getty Images

“It’s good that it will be preserved because history shouldn’t be lost – it’s the roots of our present and our future. But what we see is a small house that’s cold in winter and hot in summer.”

Others complain about the rats and mosquitoes, the damp, the wiring and the doors that warp with the weather. “Sometimes you lose it a bit when you have to talk about the building’s history because it’s not nice having to live like this,” said Uquillas, who is patient, polite and plainly exasperated.

“To tell the truth, we’re relieved and feeling a bit calmer. We’ve been living in hope and now it looks more likely that we’ll get somewhere else to live.”

For José María Uría of the trade unionist Fundación Anastasio de Gracia, which has coordinated efforts to safeguard the house and help its residents find better accommodation, the building remains a double indictment. “Because of the wall of silence that was built during the Franco regime, we scarcely know what happened in Madrid during the civil war,” he said.

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“But because of its own history, this house tells us how Madrid became the first great European capital used by the Germans and Italians to test their techniques and tactics for the terror bombing of civilians. And the poorest civilians were those living on the outskirts of the capital, in places like Vallecas. They took the most punishment.”

The idea of the new centre, to be named after Capa, is “to recover a story that had been erased”. To that end, Uría is adamant that part of the museum should be given over to a recreation of how the building would have looked when the photographer found it and how “a simple, modest house was turned into a military target”.

Then, as now, says Uría, No 10 Peironcely Street was home to the marginalised and ignored. “For better or worse, Madrid has developed and a lot of people have been rehoused in tower blocks, but I think they often serve to hide the poverty that you still find in the city,” he said.

“From the time of Alfonso XIII and the subsequent republic, all the way through the dictatorship and 40 years of democracy, people have been here in the same forgotten conditions.”