The Wapping Project in east London is the sort of place that makes city life worth living. It is an art space, free to enter, and a restaurant housed in an astonishing industrial building – a hydraulic power station that had been close to falling down – whose shows make memorable use of its volumes and machines, from which the smell of engine oil has never quite faded. Its greatest hits include Butterfly, in which the artist Richard Wilson installed a mysterious crunched-up metal object and slowly unfolded it into its original form over weeks and months. It turned out to be an aeroplane.

The atmosphere is open, welcoming, relaxed. The Project receives no public funding, but cross-subsidises the art with the restaurant and events hire – not raucous raves but such respectable ceremonies as the leaving party for the editor of the Times. And now it is closing, because the residents of three nearby apartments persistently complain to the local authority, and sometimes the police, that the Project is exceeding its approved opening hours and making excessive noise. The council, even though there is no evidence to support these claims that the Wapping Project has seen, is obliged to issue notices of possible closure. The restaurant will serve its last meal today (Sunday 1), and the bar and gallery will continue until 22 December.

The law protects the anonymity of the complainants, so it is impossible to ask them what their problems are, but the Project's director, Jules Wright, insists that she is staying within the rules, and I believe her. The Project held its first exhibition in 1993, and opened in its present form in 2000: in this time I have been a frequent visitor, and have curated an exhibition and held a book launch there. I have never witnessed anything unruly. Wright first had to close her summer seasons of outdoor film screenings. Now she has had enough of the stress and harassment and is shutting up shop. Thirty staff will lose their jobs.

It is conceivable that, for medical reasons, the complainants need exceptional levels of peace and quiet, in which case one might have hoped for a civilised resolution of the conflict. If not, I wish plagues of scorpions and locusts on these people and on their seed, bunions and murrains, erectile dysfunction and eternal thrush. They are gutless, lacking the decency and courage required to raise the concerns directly with Wright. If they want perfect silence at 10pm, why live in a city? Why not Weybridge? Two of the three sources of complaint are in apartment blocks built since the Wapping Project opened – in other words, the moaners bought their residences in the knowledge that the Project was already there. They could have gone somewhere else. Now it will be sold to a developer, which will no doubt build more apartments on the yard next to the old power station (where the delightful screenings were held), while the building itself, which is listed, will probably become a more exclusive restaurant than it currently is.

Which, possibly, is exactly what the three complainants want. They may have calculated that this outcome adds a percentage to their property (whose value would be heading towards a million). The Wapping Project has played its part in making the neighbourhood more attractive, but now it is too scruffy for the price bracket. Like a careerist's spouse, having helped to get the area to a certain level, it has to be ditched for a newer model.

This is not an isolated incident. One of the great pubs of east London is finding itself under pressure from people who bought a flat above it – presumably reckoning on a nice uplift in value once their cultural vandalism is complete. Soho is enduring a slow death by sanitisation. It's a story that repeats all over the country, in whichever places gentrification rides into town – long-established pubs, messy businesses, smelly farming, all come under threat for the crime of lowering property values. As Wright says of London: "It will be bereft of vitality, just inhabited by very rich people." Places such as Wapping, once mixed and vital, will become "wall-to-wall flats, completely uniform, culturally a complete desert".

It is impossible to legislate for all possible outbreaks of human obnoxiousness. Nonetheless, a useful job for the mayor of London, and the leaders of other cities, would be to see if laws can be framed that in urban areas shift the balance of rights away from rare individual complainants to institutions that serve the common good. Even better, but probably legally impossible, would be a law preventing people from objecting, except in extreme cases, to any business that was there before them.

But the real problem is more fundamental, which is that we live in a country besotted with residential property and its price. It is the main instrument for reviving the economy. It is the only commodity where inflation is seen as a good thing – when prices level or fall, which is probably a healthy market correction, it is seen as a crisis, to be fixed with emergency measures. Every aspect of life – social, cultural, personal, political, economic – is coloured. The role of housing bubbles in the 2008 crisis has changed nothing.

There is nothing inevitable about this, it's the result of the policy of successive governments, going back to Margaret Thatcher's first speech as Conservative party leader, when she declared her faith in a property-owning democracy. In Wapping and elsewhere, it is no longer democracy but tyranny, or oligarchy – rule by the few. It is time for a new definition of freedom, not of owners, but of a city-dwelling democracy.