Westminster's Chelsea Barracks planning decision is the latest in a series of victories for the heritage school of HRH. And there are signs that his views are falling on friendly ears in government

Not so long ago it seemed that Prince Charles, architecture guru and scourge of modernists, was safely shut up in his box. He seemed finally to have listened to shadowy advisers telling him that it would be inappropriate to get involved in public wrangles. The public and political mood had shifted in favour of the new. Contemporary buildings – the Gherkin, for example – were popular. The Prince's old adversary Lord (Richard) Rogers had the ear first of Tony Blair and then of Ken Livingstone, and some version of his theories influenced the planning system.

Furious letters would still spew from the prince's desk, urging developers to sack architects he did not like, or ministers to save an old building that he did, but these were private, and often ignored. The days when he could have multi-million pound developments ripped up and redesigned were seemingly consigned to the era of Wham! and Brideshead Revisited.

Now, however, he is enjoying his greatest influence in two decades. Last week Westminster city council approved prince-backed plans for redeveloping Chelsea Barracks in London, two years after his intervention led to a previous plan, by Rogers, being abandoned. The classicist architects the prince favours are quietly busy producing new country houses for the rich, "urban extensions" to country towns, and rural and suburban housing developments. The government is paying the Prince's Foundation for the Built Environment to advise local groups on planning their neighbourhoods. The government's localism bill, currently winding through parliament, is supposed to empower villages and small communities to draw up their own development plans. If it works as intended, the future built environment of Britain, outside the big cities, could be prince-flavoured.

The first version of the architectural prince was launched in 1984 when, invited to mouth platitudes to a dinner celebrating the 150th anniversary of the Royal Institute of British Architects, he shocked his hosts by denouncing them. He famously called a proposed extension to the National Gallery a "monstrous carbuncle", though its architects Ahrends Burton and Koralek were then up-and-coming and, as it happened, noted for their skill with building in historic settings such as Keble College, Oxford. The prince's words dealt them a blow from which they never fully recovered. In further speeches he attacked other projects, and jumpy developers would then install architects, regardless of their ability or experience, blessed by the prince for their use of a classical style.

These architects would not always last the distance, being themselves replaced in due course by practices better able to deliver commercial projects. Often the effect of the Prince's actions was to delay development by many years, while developers worked the planning system to get the most they could out of the site. At Paternoster Square, next to St Paul's Cathedral, he had objected to an initial scheme partly on the grounds that it was too big and greedy. What was eventually built, much later, had a classical look but was even bigger. At London Bridge City, next to Tower Bridge, a prince-friendly, mock-Venetian proposal transmogrified into Norman Foster-designed grey glass blocks around what is now City Hall.

With the National Gallery, however, and some other sites, he got his way, while the mere thought of him could drive developers into a pre-emptive cringe, dressing up their blocks in columns and pediments in case they attracted his displeasure. Not that they were unhappy to do this – the prince captured a common mood, in the Thatcher years, of yearning for past glories and returning to supposedly traditional values. Architects, meanwhile, were still widely reviled for their actual and alleged failures in the 1960s, so their complaints at the prince's highhandedness got short shrift from the press. They objected that his actions were an abuse of his position, that he was ignorant and petulant, and that, while he was only too happy to launch attacks on others, he resolutely refused to engage in any kind of debate himself. But these objections did not get very far.

The prince had an exhibition at the Victoria and Albert museum, a book, a TV programme. He founded an architecture school based on the premise that there was an untapped hunger for learning architecture in the traditional way, and in 1994 he launched a magazine, Perspectives, promoting his views. In 1988 he commissioned the visionary urban theorist Leon Krier to produce a plan for developing Poundbury, an area of land outside Dorchester, Dorset, belonging to the Duchy of Cornwall. Krier had famously declared ,"I am an architect, therefore I do not build", meaning that the modern world was too benighted to produce good architecture. The prince managed to persuade him otherwise.

There were separate strands to his philosophy, not wholly intertwining. One was populist, arguing that most people liked old-looking buildings, so experts should not impose modernism against their wishes. Another was nostalgic, with a preference for English classical architecture of about 300 years ago. Another was mystical, arguing that there are deep harmonies in the universe which are reflected in the sort of buildings he liked.

Perspectives did not thrill the masses, and closed. Nor did students flock to the architecture school, which was restructured as the Prince's Foundation for the Built Environment, with a reduced emphasis on education. Meanwhile the prince's architectural court was subject to intrigues that would have delighted the Borgias. Fashion changed, architects became less hated, and a few more people than embittered professionals began to see that there was something wrong with the prince using his fame and status to intervene in debates which he possibly did not understand. Apart from Poundbury, the prince's influence seemed to shrink to the area around Buckingham Palace, where one of his pet architects, John Simpson, rebuilt the Queen's Gallery, and another, Liam O'Connor, designed the Commonwealth Memorial Gates as a reduced-scale version of Lutyens's monuments in New Delhi.

But Poundbury was his lifeline, and his biggest success. Here he was doing what he wanted with his own land rather than meddling in the affairs of others. Although Poundbury got the look – it is a medley of Georgian, Dorset cottage and pointy, Gothicky bits – it also embodied principles which went beyond his stylistic taste, and which were not so different from those of adversaries like Richard Rogers. It mixes uses, putting offices and workshops in among houses, rather than in separate zones. It mixes affordable housing with market housing, such that it is hard to tell the difference. It is built at higher density than typical suburbs, so that it consumes less land and encourages neighbourliness. It promotes pedestrian movement over driving.

Buyers liked it. It achieved above-average values, and properties appreciated. Its periphery is now a whirr of construction, as more and more homes are built to meet the demand to live there. Personally, it makes my flesh creep, with its winsome, confected quality, and with its paranoid insistence on conjuring a bygone world that never existed, which illusion is painfully punctured by the appearance of modern steel frames in the half-built buildings. As even one of the Prince's allies says: "You can't claim it is traditionally Dorset by any stretch of the imagination."

But I wouldn't live in Dorchester anyway, and I can see that it works, and that it is much better than the average housebuilders' wares. I can even see some charm in the winding lanes, now softened by well-established planting.

Similar ideas were applied on other Duchy of Cornwall properties, in places like Shepton Mallet and Midsomer Norton in Somerset. Meanwhile the foundation, repurposed as an advisory, thinktank sort of body, made itself more credible. Its chief executive, Hank Dittmar, was formerly a leading light of the American New Urbanism movement, which has been pumping out walkable, compact residential developments for some time. Its most famous work is Seaside, the holiday town in Florida where The Truman Show was shot. Under Labour the foundation talked the government-approved talk of sustainability, regeneration and public participation. It developed something called Enquiry by Design, where local residents and experts come together in workshops before plans for new development are completed: the idea is that local knowledge and wishes are incorporated into the final designs. The foundation won the attention of John Prescott, and advised on the planning of Upton, an extension of Northampton, on Poundbury-esque principles. Now, in Sunderland, Ayrshire, Swansea, Burnley and elsewhere, there are foundation-led plans in various stages of completion. The foundation has even been hired by the developers First Base, usually known for their use of contemporary design, to advise on a classical-looking development in a conservation area in Highbury, north London.

It has published a book called Tradition and Sustainability, and is building a prototype, called the Natural House, which aims to demonstrate that energy efficiency does not require modern-looking gadgets but can be achieved with something that looks like an approximation of an 1840s villa. The foundation has gone international, with projects in China, the Galapagos, and Haiti, the latter a plan in the heart of Port au Prince, which looks wildly optimistic in its serene orderliness.

The foundation apart, architects from the princely fold are doing well. Robert Adam, of Adam Architecture, has long been the most business-like of traditionalist architects and, having designed some projects for the Duchy of Cornwall, is now masterplanning an extension to Dover with a whopping 5,750 homes, and residential developments in Waterlooville and Aldershot. He also has a nice line in huge, brand new country houses, which he says reflects the fact that "London is a global city". His clients are "Russians, Indians, Middle Eastern: they want the English dream but they want to be able to do what they like with their house, which they can't do if it's old". Adam recently lost a planning inquiry into his enormous £20m Athlone House proposal in Hampstead, but has plenty more opportunities of a similar kind.

At Chelsea Barracks the prince had written a personal letter to the ruler of Qatar, as his family's property company Qatari Diar were owners of the site, urging him to abandon Richard Rogers's plans. His "heart sank" at the sight of what he called "a gigantic experiment with the very soul of our capital city". He punted an alternative scheme by Quinlan Terry, the doyen of modern classicists, and his son Francis. Ultimately the Terrys did not get the job, but Rogers was fired and a collaboration of Squire and Partners, Dixon Jones and the landscape architect Kim Wilkie, produced designs which aim to reproduce the virtues of Georgian and Victorian terraces and squares. This was a turning point, a moment of regime change. Lord Rogers's project would, if built, have been the fulfilment of years of campaigning and building influence with the likes of Ken Livingstone in order to realise his vision of the city. Its dumping, supported by Tories like the deputy mayor Kit Malthouse, marked the end of that particular era.

The Chelsea Barracks Action Group, made up of local residents, were vociferous opponents of the Rogers scheme, and were delighted with the prince's actions. Now, however, they are disappointed that a change of style has not changed the fact that the proposed housing blocks are up to 100 feet high. "They will be regarded in history as the beginning of the end of our gracious English city," says the chair of the group, Georgine Thorburn, using prince-like language. She also says that the Qataris have "duped" the council. Alas for the group, unless Boris Johnson can be persuaded to intervene, her words come too late. In the latest version of prince-ism, the pragmatists have won over the mystics and true believers, which means that, as the prince himself inclines to the latter camp, his own input is diluted. His recent contribution to the mystic cause, a book called Harmony, failed to set the world on fire. Quinlan Terry, always the purest of the classicists, is doing perfectly well with country houses, buildings for Downing College, Cambridge, and occasional commercial work, but he is not shaping whole towns.

The Prince's Foundation, according to Elliot Lipton of developers First Base, "is very flexible. It has no preconceptions, which isn't what you might expect if you listened to their leader. They're very good at understanding real world trade-offs."

The foundation gets into bed with developers such as Wimpey in Westoe, South Shields, with the result that they achieve an arguably better version of usual Wimpey fare, rather than a radical alternative. Upton, the extension to Northampton, as Hank Dittmar acknowledges, is a partly compromised version of the original intentions. By being more pragmatic, the foundation gets less distinctive: plenty of others have put forward energy-efficient houses, and public consultation, and walkable, high-density communities. These ideas are "sort of the norm, mainstream", says Robert Adam. Works outside the princely sphere, like the Greenwich Millennium Village, and the Accordia development in Cambridge, put them into practice.

What remains distinctive is the look, the preference for a randomised variety of traditional styles, with Georgian and Country Cottage foremost among them. This is a source of strength, as a lot of people like this – according to Robert Adam, 70% prefer old-looking buildings to new. The competition, in the form of volume housebuilders' standard product, is largely poor. In combination, these factors are effective when it comes to reducing outrage at controversial plans, which, with continuous pressure of development in town and country, will continue to appear. Poundbury itself is the expansion of Dorchester into green fields, and many locals still object to it on those grounds. The Dover expansion, as Adam recognises, met strong opposition on the grounds of its size. The switch of styles got Chelsea Barracks through the planning system, to Georgine Thorburn's dismay.

Under the localism bill, communities and villages will have the power to draw up their own plans for development, in ways that benefit them. There is scepticism as to whether this will really happen, but if it does, communities will face the central problem of rural planning: how to reconcile the pressures for new development, the high values that housing can yield, the need for affordable new homes, and the preservation of villages. The models offered by the Prince's Foundation, with a combination of public consultation, and a style that tries to disguise that change has happened, will be attractive. Even if localised planning does not work, the palliative effect of traditionalist design will still be in demand.

I have long believed that the prince should keep his mouth shut rather than use his inherited status to give weight to views greater than his wisdom alone would merit. He should not change policies, lives and careers with the force of his name. Sometimes he might be right, sometimes wrong, but that is not the point. In 2009 the RIBA, ever masochists, invited him back for their 175th birthday. Sitting through his talk I felt growing rage at his tendentious nonsense – the demonstrably untrue statement that modernist architects were nature-haters, for example – and at the fact that no one was allowed to challenge him directly. He sallies forth to attack others then immediately takes shelter behind the dignity of his position. I also find depressing the idea that a modern house can be no better than a half-convincing photocopy of an old one, or that, as we live in a time when large windows are easy to achieve, we should build small, mean ones, as in Poundbury, just because they look old.

Yet he is entitled to do what he likes, within the constraints applied to any landowner, with his own property, and he and his associates have come up with ways of building new rural developments that have a certain logic. The range of alternative models is not abundant, and architects and developers who would do better should study the reasons for the appeal of the prince's way. As things stand, Poundbury is a glimpse of the future.