The news has angered Crouch Hill residents living near the historic Church Studios, who have criticised the plans' "significant effect" on the "local arts scene" in a letter.
Gray purchased the studio from The Eurythmics in 2003, but said in a statement that "the current upheaval in the music business" means that maintaining space as a recording studio is now not an option.
In the planning application to Haringey Council, Gray's architect Mark Ruthven said: "It is completely obsolete, it doesn't get used. This is a way of the building being used.
"The heritage is preserved," he added. "The important thing is to find a re-use and that it is done in a sensitive way."
But local resident Steve Watson said in a letter objecting to the plans: "The Church Studios have been a part of Crouch End's artistic and creative heritage for decades.
"Many local musicians use and are based in the building," he wrote. "This will have a significant effect on the vitality of the local arts scene and the character of the area."
In response to the plans, Stewart posted a message on Facebook, in which he said he could "understand" Gray's decision.
"It (Church Studio) has so many memories for me," he wrote.
"Dylan would turn up with his band and hold court," he continued, "or Joni Mitchell would play drums! Things have changed now. Music Scene is not the same, I understand him (David Gray) having to sell.
Gray, who released his ninth album 'Foundling' in 2010, will need to gain planning permission for the flats from Haringey Council, whose planning committee sits once a month.
Bob Dylan revealed this month in an interview with Rolling Stone that a song on his forthcoming album 'Tempest' was inspired by Leonardo Di Caprio in the film 'Titanic'.