A Jewish housing group has committed £2.5 million to a Stoke Newington project whose future hangs in the balance.

On Tuesday, the Agudas Israel Housing Association launched an appeal against the rejection of plans for a three- and four-storey development in Lordship Road incorporating special-needs and kindergarten facilities and 14 units of affordable housing.

The council had queried whether the development, intended to cater for 110 special-needs students, would deliver a high-quality learning environment.

AIHA chief executive Ita Symons told the appeal: “The school is needed. We’re not funded by the government and we don’t have the funds for a bigger site.

“We went to the council with our plans before we went to the bank. They said they would support the project and recognised the need for a school and housing.

“We bought the site for £1.5 million and we wanted to comply with the council. We wouldn’t have spent that money lightly.”

Additional costs had totalled £1 million, she said after the hearing. The AIHA, which provides low-cost housing for Jews in London and Salford, has a list of 700 families wanting properties on the site. The association recognised that homes in the area were being used without permission as educational facilities. It argued that this problem would, at least in part, be rectified if the Lordship Road project was approved.

However, a council spokesperson told the appeal: “The floor-space does not maximise the education needs.”

Local residents opposing the scheme argued that approval would cause a significant amount of “noise and light pollution” and affect their quality of life.

Interested parties took a tour of the site on Wednesday morning. A decision is expected in the next few weeks.