Brown's plans to build three million new homes 'will bankrupt social housing sector in five years'

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Government plans to ease the country's housing shortage by building three million homes will bankrupt most of the social housing sector within five years, an industry body claims.

The National Housing Federation (NHF), which represents England's social housing providers, says ministers' financial predictions are based on an assumption that housing associations will fund the work by taking out huge loans which, in reality, they will be unable to afford.

The NHF hit out before the publication tomorrow of the Government's Housing Green Paper, which is expected to include the release of public sector land for housing and carbon-neutral eco-towns.

Gordon Brown has said that the new homes would be built by 2020, and up to 70,000 of them would be social housing, built mostly by housing associations. A new financial settlement has been agreed with the social housing sector but the NHF warned ministers in private talks last week that their financial assumptions were so flawed they would "kill the goose that lays the golden housing egg."

Ministers' figures came from a Housing Corporation report called Unlocking the Door, published earlier this year, said the NHF.

Housing associations in England have built 40,000 new social homes a year for the past decade, and at the moment, the Government is giving them £2bn a year to do so. The report claimed that housing associations could make their assets work harder by borrowing greater sums of money, in which case ministers would be able to cut the amount of public money invested per house by about a fifth.

But the NHF claims that this would force such heavy borrowing on housing associations that they would be unable to meet their loan conditions after five years.

The corporation's modelling also failed to take into account the millions of pounds housing associations had to spend on meeting mandatory environmental standards in their new-build stock, the NHF said.