The Peabody housing association has agreed to buy the site of Holloway Prison in north London where it plans to build more than 600 social rented and affordable homes.

The purchase, believed to have cost £82m, was supported by a £41.6m loan from the mayor of London’s £750 Land Fund. The deal took place nearly two years after the Ministry of Justice invited bids for the 10-acre plot.

To get the loan, which has to be repaid in full, Peabody has had to assure the mayor that 60% of the 1,000 homes to be built on the site will be “genuinely affordable”.