Neighbours were alarmed to discover they were living close to a convicted terrorist after Khan killed two people and injured three more during his deadly rampage.
The bail hostel on Wolverhampton Road, where Khan hatched his murderous plot, was raided by police hours after the attack in the capital.
He was tackled by heroic members of the public and fatally shot by police.
Khan had been part of a terrorist cell based in Stoke-on-Trent before being jailed for his part in a plot to blow up the London Stock Exchange.
Since being released from prison in December 2018 after serving half his sentence he had been living in Stafford, and had been seen coming and going from the flats near the Star and Garter pub by neighbours.
Asked who would be responsible for housing Khan in Stafford, the Ministry of Justice (MoJ) said "multiple agencies", including the Probation Service and security services, "work together to decide the most appropriate" location.
The MoJ said it could not comment on specific reasons why the Stafford flats were chosen for Khan due to "sensitivities".
The 28-year-old was on licence from prison and subject to a series of conditions, including residing permanently at a single address and receiving regular visits from supervising officers.
Stafford Borough Council said it consults with agencies over the placement of dangerous criminals.
A spokesman said: "We work closely with the police and probation in finding suitable accommodation for serious offenders on release from prison.”
Outgoing Stafford MP Jeremy Lefroy said he understood people in Stafford would be alarmed a man intent on murder was allowed to live among them.
He said the attack should serve as a "wake-up" call for the Government and the security services.