Brent Council has applied for permission to demolish Dollis Hill House after a last-ditch attempt to save it fell flat.
It will now be up to English Heritage to decide if the Grade II listed building that has stood in Gladstone Park for more than 200 years is razed to the ground.
Since February charity Training for Life (TFL) has been developing a business plan to turn the derelict villa into a cafe that provided training for jobless residents.
But they were forced to pull out last month after the Mayor of London, Boris Johnson, announced that £2 million worth of funding his predecessor Ken Livingstone had pledged to the project was no longer available.
Martin Redstone, from the Dollis Hill House Trust (DHHT) said he was disappointed with the decision, unanimously made at a council executive meeting last night, but accepted the local authority had no other choice.
"We were very buoyant last year after getting TFL on board and securing the funding, but we have basically been credit crunched," he said.
"The process of getting consent from English Heritage will take about a year so we are still hopeful that another group will show some interest in taking the project on but money is tight everywhere."
If demolition consent is granted to the council, the house, which was a favourite retreat of former Prime Minister William Gladstone, will be flattened by bulldozers and landscaped over and a memorial will be placed on the site.
The iconic house has laid derelict since 1994 after it was declared surplus to council needs.
Since then, it has been the subject of three separate arson attacks and is costing the council hundreds of pounds a year to secure.
Over the years, the house has been put on the open market to be refurbished by a willing organisation but no proposals were deemed appropriate - until members of the DHHT got TFL on board.
The charity was seen as the last chance to bring the building back into use but said it was left with no option to pull out because of the Greater London Authority's decision to pull the funding.