With house prices crashing, repossessions rising, unemployment soaring and construction at a standstill, keeping a roof over our heads is set to get much tougher.

Two years ago the housing market was booming, banks lent borrowers five times their salary and people felt relatively safe in their jobs. Fast-forward 24 months and the couple who stretched themselves to buy that £400,000 home in Berkshire have been forced – via unaffordable mortgage payments and then repossession – on to a long queue to find a council house.

This downward spiral now threatening tens of thousands of people has been compounded by a virtual standstill in building private and social homes. In the short term many people will be forced to rent instead of investing in bricks and mortar.

Treasury officials are now working round the clock to come up with affordable solutions – or sticking plaster – before the Pre-Budget Report on Monday. But statistics are stacking up against them.

At least 45,000 homes will have been repossessed by the end of December, a 70 per cent rise from last year, while the number of mortgages in arrears has jumped by 22 per cent. Meanwhile, first-time buyers wanting a home can’t even get a toe on the property ladder because no one will give them a mortgage.

Gordon Brown’s plan to build three million homes by 2020 now looks laughable. Only 100,000 have been built this year against the Prime Minister’s proposals to build 200,000 per annum, rising to 240,000 by 2016. As a result construction companies have laid off up to half of their staff and housing associations that have borrowed too heavily may go under.

Most of this is because of the credit crunch, but the Prime Minister is now facing a more pressing problem through the Government’s failure to build enough council or social homes during the past 11 years.

In the 1950s more than 200,000 council homes were built each year, dropping to 100,000 in the early 1980s and falling further to 30,000 by 1997 when Tony Blair became Prime Minister. Labour failed to accelerate social-housing construction, letting it drop to under 20,000 in 2002 before it rose gradually to 30,000 last year.

Now four million people are waiting to be housed by local authorities, with one million expected to be added next year. Those who can’t stay with friends or family are housed in often overcrowded bed and breakfasts.

But the picture is getting worse. Most social housing is now built on mixed estates with private homes. Where developers have stopped building commercial projects, the social housing – including shared-equity homes – has suffered too.

Housing associations, in turn, often buy up mixed developments so that they can subsidise their social homes with private rents or sales from private homes. With a virtual standstill in construction, many of the 1,900 housing associations are in big difficulty and are having to merge to avoid closure. About £500 million worth of social housing schemes has been mothballed this month alone.

Homeless charities are urgently demanding action from the Chancellor to address the problem.

On Monday the Government will publish proposals from Sir James Crosby, the former head of HBOS, to improve the availability of mortgages and reinvigorate the housing market.

Alistair Darling is under pressure to extend stamp duty holidays and reintroduce mortgage interest tax relief. He is also considering a multibil-lion-pound programme for social housing to help the construction industry as it waits for the market to pick up.

Housing experts fear that this could lead to a return of 1960s-style council ghettoes with hundreds of social homes in high-rise buildings.

Policy analysts argue that initial developments are likely to be small – about 12 to 20 homes on one site – but in the short term this could be solely social rented housing. Later some could be transferred to private rented and shared-equity homes or sold off when the market picks up.

But the Government is wary about spending its billions unchecked. The Chancellor is now considering a scheme to get a return on his cash. At present housing associations have to meet 60 per cent of the cost of developments through borrowing from banks and cross-subsidies from private developments. They get 40 per cent upfront from the Treasury in a grant.

But Mr Darling is thinking of giving more money to housing associations in the form of loans or equity. They would be expected to pay back the equity through private rents or sales when these can be realised. He will also expand the mortgage rescue scheme announced in September. This allows the housing association to buy equity in a house facing repossession. The homeowner then pays the association rent but can remain in the house. When the home is sold, the association gets part of the proceeds.

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