Design and technology teachers know it is as one of the famous names of Modernism, history teachers will find it a fascinating case study in 20th-century urban living and English teachers will be familiar with the work of one of its illustrious former tenants. And by this time next year 25 teachers will be living in the inspirational surroundings of the Isokon flats in north London.

Built in 1934 by a visionary architect and a furniture designer, the Isokon building in Lawn Road, Hampstead, was a magnet for artists and intellectuals in the Forties and Fifties. Decades of neglect have turned it from a gleaming white monument to Modernism into a damp-streaked shadow of its former self. But following a pound;2 million refit under the Starter Home Initiative, 25 of the 36 flats are to be sold to teachers working in Camden.

The Isokon was the brainchild of furniture-maker Jack Pritchard and Canadian architect Wells Coates, who were inspired by the social purpose and minimalism of the Bauhaus movement in Germany and Le Corbusier in France. Although tiny, the flats were technically ahead of their time. The first residential block to be constructed from reinforced concrete, the Isokon flats came ready furnished with sliding wall partitions, fitted kitchens, plywood furniture units and seagrass carpets.

The Isokon had its own basement club - the Isobar, designed by Bauhaus refugee Marcel Breuer - where residents, including Agatha Christie and Bauhaus founder Walter Gropius, would hang out with Hampstead luminaries such as the sculptor Henry Moore, the artist Barbara Hepworth, and the architectural historian Nikolaus Pevsner. They could sample what were then exotic dishes such as spaghetti bolognese or kebabs prepared by Philip Harben, who later became Britain’s first TV cook. Or they could have meals sent up to their room in the dumb waiters - one of a range of services from window cleaning to shoe cleaning available to the first residents.

But by the early 1970s the utopian community of artists and free thinkers had drifted away and the flats began to fall into disrepair. New tenants, unsympathetic to the minimalist ideals of their designers, ripped out many of the original features. Camden council bought the flats in 1972 but, lacking the resources to make more than piecemeal improvements, stood by as their condition deteriorated.

As the few remaining council tenants moved out, the Isokon grew ever more derelict, a target for vandals and fly tippers. Concerned by the demise of the historic landmark, in 1999 local architect Chris Flannery set up the Isokon Trust, to campaign for the restoration of the Grade I listed building. And this year Camden sold the flats to one of London’s biggest housing associations, the Notting Hill Housing Trust, on condition that once renovated they should provide accommodation for key workers - specifically teachers.

Twenty-five of the flats will be available to first-time buyers on a shared ownership basis, with the other 11 - including the penthouse flat with roof terrace where designer Jack Pritchard and his family lived until 1972 - sold on the open market to help finance the work.

Chris Flannery is cataloguing original features that have to be removed when the refurbishment work begins, and which will be rehoused in a small public museum on the ground floor when the building’s transformation is complete. “It is as important for its social history as its architectural merit,” he says.

Agatha Christie compared the building’s sweeping horizontal balconies to “a giant liner”. Its beautifully proportioned outline is still evident through the grimy exterior and its iconic status continues to attract public interest. When the trust mounted a week-long open-house exhibition earlier this year in what had been Walter Gropius’s flat, 4,000 people visited it.

When the flats are advertised to teachers in Camden in the new year, Nicholas Breakespeare of the Notting Hill Housing Trust expects interest to be just as high. “This is the first time people have been targeted by job type and money has been earmarked especially for them,” he says.

Although the trust will point people in the direction of financial advisers, it is up to individuals to get a mortgage of between 25 and 75 per cent of a flat’s value (prices will also be discounted, in an area where two-bedroomed flats normally fetch pound;300,000). After that “we are almost like a private developer - it will be done on a first-come, first-served basis”, says Mr Breakespeare. The flats will be restored in keeping with the design specifications of their creators.

It takes a leap of imagination to look beyond the boarded-up windows and crumbling balconies and imagine a close-knit community of creative, intelligent young people living here again just as Jack Pritchard and Wells Coates envisaged almost 70 years ago. Their dream will be resurrected when the first teachers move in next year, but new residents hoping to enjoy a celebratory drink and relive past glories in the basement club will be disappointed - the Isobar closed 30 years ago.