“A fitting memorial to remember those who lost their lives” could be built on the site of Grenfell Tower .
A statement from the government's Housing Department said survivors, the bereaved and the local community would decide what happens on the area's future.
Latimer Road Tube station could also be renamed to honour the 71 people who died in the disaster in June last year.
Shahin Sadafi, chairman of the Grenfell United survivors’ group, said the decision showed “dignity and respect” for victims from the government and Kensington and Chelsea Borough Council .
The tower block is widely expected to be demolished but questions remain on what will happen to the land it sits on.
The housing department statement confirmed the “common assumption” is there will be a “fitting memorial to remember those who lost their lives”.
Those affected by the blaze will be “given a veto on all future decisions” and the local Latimer Road Tube station could be renamed in their honour, the statement added.
It pledged: “If the bereaved, the survivors and the local community do not want the site developed for housing, then the site will not be developed for housing.”
Grenfell United survivors’ group chairman Ms Sadafi said: “We hope working together to create a fitting memorial will be part of a healing process for everyone affected.”
Kensington Labour MP Emma Dent Coad said constituents had written to her with “sensitive and interesting” ideas, including for a memorial.
She added: “The site’s future must be decided by those who have been most affected by the fire, and close neighbours who will live with their memories forever.”
Council leader Elizabeth Campbell added: “Since day one of my leadership I have been clear – the council will listen every step of the way to the survivors, the bereaved, and the wider community and assist in any way it can to ensure that a lasting memorial is put in place.”
The government issued the statement to show the principles which will guide future consultations on what happens to the site.
The local authority has pledged to hand ownership of the land to a “body represented by the bereaved and survivors” if that is their wish.
Communities Secretary Sajid Javid said: “I have always been clear that only by first listening to the community can we begin to rebuild their trust.
“This public commitment is a demonstration of us being true to that word and I am pleased we have been able to agree a way forward.”
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