Westminster Council has sold a family council house on the open market for more than �2million.

The grade-II listed Georgian house in the exclusive St John’s Wood Terrace, St John’s Wood, had a guide price of �1.6million before it went up for auction on Monday, but the hammer fell at �2,120,000.

Westminster Council said the three-bedroom house with front and rear gardens would have needed more than �200,000 spent on it to be habitable, and told buyers it had “further development potential”.

But it defended its decision to sell off the house despite having around 2,000 families living in temporary accommodation due to a chronic shortage of council housing, saying the money would be put towards “more and better” affordable housing for up to 10 families.

Cllr Paul Dimoldenberg, leader of Westminster’s Labour group opposition, said: “With so many families living in overcrowded conditions it is madness for the council to sell off more of its housing stock.

“The council has already sold over 9,000 homes over the past 30 years and this is partly to blame for the current housing crisis.”

Cllr Jonathan Glanz, Westminster Council’s cabinet member for housing, said: “By auctioning this house, we are able to use the proceeds of the sale to achieve more and better affordable housing for up to 10 families in housing need.

“We have also sold a studio flat suitable for one person in Maida Vale for �425,000, an amount which has also been earmarked for family home building schemes here in Westminster.

“We are working very hard to maintain mixed communities in Westminster, where homes are not only for the very wealthy or the least well off.”

The council said it has not sold any other homes in the past two financial years.