Hackney Council has refused a planning application by the strictly Orthodox Agudas Israel Housing Association for an £8 million special-needs school and housing development because of the potential “overbearing impact” on neighbours.

The rejection has dismayed Agudas Israel chief executive, Ita Symons, who said: “Our application was totally compliant with all the laws, it satisfied all the criteria. The problem is the neighbours. They don’t want more Orthodox Jews in the area.

“Hackney Council don’t want to deal with the anger from the neighbours so they’ve refused it — and they don’t have to deal with the appeal. I have no doubt we will win the appeal.”

The development is for a kindergarten and junior school for 110 children, both special-needs and mainstream, learning side by side, a project Agudas Israel rescued when it hit financial problems. The school would get the land for free, in return for permission to build 14 housing units for Orthodox Jews on top.

Noise and disturbance to neighbours of the Lordship Road development was one of three reasons for the rejected application — the other two were design related.

Mrs Symons said she understood why neighbours might not welcome an influx of Orthodox Jews. “We look different, we don’t integrate very much, we have a starkly different culture. Of course some of the men don’t speak to ladies and that’s interpreted as awkward and rude. I hope with education and information and an open mind on both sides that this can improve.”

A Hackney spokesperson said the council would not comment further.