Two million families could be on the social housing waiting list within two years, it was warned yesterday.

Almost half of the councils say they are unable to cope already with increasing demand for housing association accommodation, as the credit crunch and rise in cost of living continues to soar.

The number of households waiting has grown from one million to 1.6 million in six years, according to a new report by the Local Government Association (LGA) to be published later today.

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Paul Bettison, Chairman of the LGA's environment board, said: "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. "The days of excessive lending and risk-taking which led to this credit crunch may be over, but consumers have yet to see the government's £50 billion bail-out to cash-strapped banks filter down to mean lower borrowing rates for potential homeowners."

Housing Minister Caroline Flint said: "The demand for more housing, including social homes, isn't new.

"We welcome the LGA's backing for government investment to provide 70,000 affordable homes a year by 2011, including 45,000 social homes for rent.

"I hope they will be instrumental in persuading their member local authorities to support plans for increased housing supply to meet the needs of local families on housing waiting lists."

(CD/JM)