Demand for social housing to rise

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The combined effects of the credit crunch and the slowing economy could see two million families stuck in the queue for help, they said.

Almost half of councils say they cannot cope already with increasing demand for housing association accommodation as the number of households waiting for it has grown from one million in 2001 to 1.6 million in 2007.

Hundreds of thousands more are now expected to join them by 2010 as a result of high house prices, fewer mortgages, increasing numbers of repossessions and a slowdown in housebuilding.

Housing Minister Caroline Flint warned the Cabinet this week that housebuilding was "stalling" and that prices could fall be up to 10% "at best" this year.

She also acknowledged, in secret notes which she failed to keep hidden from photographers, increasing defaults on mortgages.

The Local Government Association (LGA) has called for councils to be able to be given greater freedoms to increase their housing stock by being able to borrow freely and remortgage assets to reinvest.

Paul Bettison, chairman of the LGA's environment board, said social housing had to be "a top priority" because fewer people were getting on the property ladder.

He said councils were eager to improve their housing stock but were "hamstrung" because of restrictions on their powers.

"With the banks overstretching their credit facilities it could well mean that in the coming months that councils will have to help pick up the pieces as people end up on social housing waiting lists," he said.