Excalibur estate in Catford, London. The local council says it would be virtually impossible to bring the prefabs up to modern standards. Photograph: Martin Godwin for the Guardian

The UK's largest surviving estate of postwar prefab houses, described by conservationists as a unique slice of 20th-century social history, is set to be bulldozed and replaced by modern housing.

Only six of the 187 compact bungalows, erected from factory-built panels by German and Italian prisoners of war in 1945 and 1946, will be saved, after they received Grade-II listing last year. The remainder of the Excalibur estate in Catford, south-east London, will be demolished, along with its tin-roofed prefab church, St Mark's, believed to be one of a kind.

Campaigners say the planned redevelopment, formally approved by Lewisham council in September, will destroy a key piece of history from the aftermath of the second world war. The estate is the biggest surviving remnant of an ambitious project which saw 160,000 prefabs hurriedly erected during an acute housing shortage. Keeping just six, surrounded by hundreds of brand new houses and flats, would be pointless, they argue.

"This case shows a real gap in the historic protection legislation for 20th-century buildings," said Jon Wright from the Twentieth Century Society, which is urging English Heritage to step in and declare the entire estate a conservation area. "The overall planning and layout is far more important than just a few individual buildings. This is the only place in the country where you can still see an estate like this. It is very significant."

The local authority has long argued that the 55 sq metre (600 sq ft) houses, originally intended to last no more than a decade, are so basic it would be virtually impossible to bring them up to modern standards, a view shared by a number of residents, who are mainly council tenants.

But after a campaign by other locals to preserve the Excalibur, so called as the roads were named after characters from Arthurian legend, English Heritage recommended 21 homes be listed. The Department for Culture granted protection to six. Under current rules for 20th century properties, listing is reserved for buildings with few modifications while most Excalibur homes have

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