The Government’s plan to rescue the construction industry by building more social housing could result in 1960s-style ghetto estates, housing experts have cautioned.

Gordon Brown has already brought forward £400 million for social housing and a further cash injection is expected to be announced in the Pre-Budget Report this month.

But housing chiefs fear that in the wake of the collapse of the private housing market social housing will dominate new developments, replicating the “sink” estates of the 1960s and 1970s.

Tony Travers, local government expert at the London School of Economics, said: “With a sudden rush to build more social housing there is a risk that zones of 100 per cent social tenure will be created. That in turn would risk embedding once again the social problems and poverty of the Sixties council estates.” For a generation, policy-makers and ministers have backed integrated developments in which subsidised rented housing is mingled with shared equity and privately owned homes.

The Government’s new Homes and Communities Agency is now urgently searching for ways to stop the credit crunch forcing a reversal of a 25-year-old policy.

Currently, more than 58 per cent of social housing is built by private developers in mixed estates under deals struck with local councils. Contracts require housebuilders to ensure that between 25 and 50 per cent of the homes are for shared equity or subsidised rents. Housing Associations use a similar model, buying land to build mixed-tenure developments so that they can sell the private homes to cross-subsidise the costs of social housing.

In the past few months, however, private sector housing development has largely stopped, seriously jeopardising low-cost homes. Where it has gone ahead, developers have tried to strike deals with councils to cut shared-equity homes or social housing out of the project, The Times has learnt.

Conversely, housing associations that have cash are beginning to build sites in which all houses are for subsidised rent or shared equity.

Housing organisations, including the National Housing Federation, are pressing the Government for extra cash to help the 1.7 million households still waiting for social housing.

The construction of social housing has slumped in the past 12 years and fewer than 22,000 homes for social rent were built last year. Social sacrifice]

Case study

Southwark Council has abandoned plans to include shared ownership homes in Larnaca Works in Bermondsey, South London, to prevent the scheme being mothballed.

The regeneration project was granted planning permission last year for 63 private houses, 10 intermediate or shared ownership homes and 17 properties rented by a housing association.

But Southwark’s planning committee agreed last week to axe the affordable housing quota if Union, the developer, begins work within six months. After renegotiation, the development will now provide 72 private dwellings and 18 homes for social rent.

Rebecca O'Connor

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