The issue is an explosive one in a borough with a large and youthful Bangladeshi population needing more room for prayer and a shortage of affordable homes. The potential for a racist backlash simmers constantly beneath the surface.
Religious leaders at the East London Mosque on Whitechapel Road say only the local Labour-controlled council is preventing them from buying the land - currently a car park next to the mosque - off the developers who own it. The council, however, gave permission to the developers, Ballymore Properties, to build luxury flats on two other nearby sites in return for a promise to use the disputed land to build one-bedroom flats for a housing association.
"The worry about all this is that with the scale of property development across the borough, if we are seen to be going back on planning obligations other developers will take advantage," said Michael Keith, leader of Tower Hamlets Council. Tower Hamlets has more than 14,000 people on its homeless list and the council is keen to exploit national planning rules that oblige property developers to build 20 per cent low-cost housing stock in all major housing developments.
The mosque has already made an offer to buy the land for pounds 500,000, but that was turned down by council planners. And mosque members rejected an agreement with the developers whereby the mosque got part of the land, because they wanted the whole plot.
The developers would be happy to sell the land to the mosque - it would be cheaper than building low-cost houses on the site. "The irony is that relations between Ballymore and the mosque elders are excellent," said a Ballymore spokesman.
The mosque claims the support of the adjacent synagogue and local churches which, faced with rapidly falling congregations, can only look on in envy at the growing influence of organised religion among the mainly poor Bangladeshi population. Many of their own places of worship in the borough have been converted into flats for young professionals.
The mosque, increasingly the focus of political protest for Muslims in the borough, is the second oldest in the UK and the only one where the call to prayer, "adhan" is allowed.
On Fridays, the Muslim holy day, lack of space regularly forces worshippers out on the street to pray. "There is a large younger generation population that over the next couple of years will want to come to the mosque, and at the moment there is no way we can accommodate them," said Dilour Khan, a mosque trustee.
The 60-odd dwellings earmarked for the site are all one-bedroom flats, which Mr Khan says are of little use to the Bangladeshi community and its large extended families. Mosque leaders also fear new residents might threaten the right of the mosque to call for prayer.
Council housing officials say there is a growing demand from young single Bangladeshis for housing in a community that is also suffering from the break-up of the traditional family. Councillor Abdus Shukur, who chairs the council's housing committee, says local press claims of fatwas or intimidation from Muslim activists are nonsense. "I'm more used to getting threats from Combat 18 [a far-right fascist group] like, 'Paki ... we know where your son goes to school'. With regard to the mosque there have been no threats, just angry phone calls."
Mussadiq Ahmed, chairman of the Mosque Action Committee, says he fears trouble if the mosque is not allowed to expand. "The young people will resist. They will be ready for civil disobedience," he said.