One of London's ugliest buildings is to be replaced by a complex of offices, shops, houses and open space. The 21-storey block at Marsham Street SW1, the headquarters of the Departments of Environment and Transport, will be razed in 1997, removing a much-criticised eyesore from the skyline. Work will then start to transform the five acre site.

Announcing the first details of the redevelopment yesterday, the Housing Minister, Sir George Younger, said new construction would only be allowed to half the height of the existing towers. 'The magnificent silhouette of the Houses of Parliament will be restored. Not only are we planning to remove one of London's least popular buildings, but we are proposing to replace it with a well designed, quality mixed development with significant environmental and amenity gains for the locality.

The new development will consist mainly of offices, with a smaller proportion of houses or flats and a few shops and restaurants. At least three-quarters of an acre would be lanscaped as open space.

The Government has yet to decide whether to retain ownership of the site, worth between pounds 20m and pounds 30m or sell it to private developers. A decision is not expected for two years.

Outline planning permission is being sought to determine the boundaries for future, more detailed proposals. An initial planning application was submitted to Westminster council yesterday.

The weather-stained Marsham Street complex was designed during the 1960s by Eric Bedford, chief architect of the old Ministry of Public Buildings and Works. It is a product of the utilitarian style of the period, with Mr Bedford briefed to house the maximum number of people in one place as quickly and cheaply as possible. The structure was initially welcomed in principle, as it replaced a derelict gasworks. However, after it was completed in 1971 it was criticised for the way its three, 200ft towers intruded on the skyline, marring views of the capital's most historic buildings, including Westminster Abbey and the Palace of Westminster.

So dilapidated is the complex that it has been dubbed 'Faulty Towers by the 3,000 civil servants based there. Lifts are slow and unreliable, the concrete cladding is crumbling away and windows cannot be closed. In summer office temperatures can reach 30C, while in winter the building can take 48 hours to become comfortably warm. In 1992 ministers announced the block would be demolished rather than be refurbished at an estimated cost of pounds 50m.

The Environment Secretary, John Gummer, is a long-standing critic of the Marsham Street block, describing it as 'staggeringly and revoltingly offensive . . . ugly, unsympathetic, unhygienic and unsafe.

His comments stem from personal experience - in November, on his way from his 16th floor suite to inform staff of relocation plans, he was trapped in a lift with three senior aides for 25 minutes.

In May Mr Gummer again singled the offices out for criticism during a speech in which he accused British architects of egomania in creating 'brutal and alienating buildings.

Department of Transport staff are to be relocated across the road at the Great Minster building on Horseferry Road next year. From 1997 the DoE will be based at Eland House, in Bressenden Place, Victoria. The block is undergoing a substantial redesign to make it more environmentally friendly.

At one time the DoE was expected to relocate to Canary Wharf in Docklands but the plans, which prompted the threat of strike action among staff, were dropped as too expensive.