I doubt they'd put flats there. It is people's graves. Whether we like to think it is prime land to build on and ease the housing crisis is immaterial. The council and house builders/cladding company are under investigation, the police will conclude their investigations and bring charges next year apparently.
It ultimately comes down to the fact 72 people (that we know of, it has been reported there were many more living there) died, some people didn't get anything back to bury, some got a couple of bones. To put up flats, luxury or otherwise, would be controversial.
As I say whatever happens needs to be done carefully, for the survivors, the family and friends, (and the firemen). It was the worst residential fire since the war.