Thousands of families have found themselves trapped in homes - usually high-rise or system-built flats - which they cannot sell, the Commons Environment Select Committee said.
The situation was producing a "spiral of decline" on estates where much public and private money had been invested, Roy Thomason, a Conservative member of the committee, said. As owners walked away from their unsaleable homes, or cash buyers acquired them at one- third of their former value and let them to sometimes disruptive tenants, "all the positive work that has gone into many of the areas involved" can be destroyed, the committee said.
The attack on "red-lining" by mortgage lenders - defining areas in which they will not lend - came as they cast serious doubt on the Government's projections of future housing need. More social housing than the Government plans - housing association and council homes built for affordable rents - is badly needed, the MPs said.
Exact numbers of "red line" properties are unknown, but Gerald Jones, Wandsworth council's chief executive, told MPs that at least 3,500 former council properties in his south London borough were affected and matters were getting worse. "Some lenders are now refusing mortgages on many traditionally built and low-rise ex-council flats."
Yet at the end of the 1980s "lenders were literally falling over themselves" to lend on almost any type of property.
The committee said: "The lending institutions must accept that wherever they are prepared to lend on new or newly privatised homes, they are entering into a commitment which is no less long-term than that entered into by the borrower.
"The practice whereby lenders [in effect] withdraw from lending on properties which they have previously been content to accept as security against a loan is in our view unethical and should cease."
The Council of Mortgage Lenders denied areas were formally "red-lined" and accused the committee of overstating the issue. But where homes and flats faced high maintenance and service charges, crumbling structures and declining marketability, lenders had to consider the interest of their investors and not lend. "It is wrong to believe this is a widespread problem. The vast majority of right-to- buy homes remain perfectly mortgageable."Reuse content