The self-styled “co-operative borough” has been booting out hundreds of people living in housing co-operatives so it can make millions by selling the run-down houses they have looked after for decades.

Hundreds of people living in “short-life” housing co-operatives are being handed repossession orders by Lambeth Council and told they must move out, or face criminal prosecution.

Their houses, which they have spent thousands repairing and sometimes maintained for more than 40 years, are now being sold at auction for bargain-basement prices.

The scheme, that originally included a stock of 1,200 homes, now has just 170 houses left.

One property, a 10-bedroom house in the Chase, Clapham, recently netted £1.6m for the council in July 2011, but a smaller six-bedroom house on the same road is being marketed at £2.6m.

Meanwhile, a three-bed maisonette in Rosendale Road, West Norwood, was sold for £260,000 two years ago, and the flat above, which is the same size, is also in the process of being sold for a similar price.

Despite this, a neighbouring six-bedroom house was sold for £925,000 in November last year.

Scores of properties are being sold for more than £575,000 each, according to campaigners, often short of their full market value.

The council was on track to make £32m in the year up to last month, according to a cabinet report from July 2011.

The council claims the cash is being used for improving schools, neighbourhoods and its housing stock – half of which was found to be sub-standard in 2010.

Those being threatened with repossession, many of whom are families with young children, were recruited by the council in the 1980s to look after homes that it could not afford to repair.

They were given charge of managing run-down properties, spending thousands on maintenance, while paying rent to a central co-op body.

Campaigners estimated co-operatives have spent more than £50,000 in maintenance and management on each property over a 30-year period, and co-op members carried out the equivalent of £150,000-worth of labour on their homes over the same period.

But now, the council is threatening tenants with court orders and occupation charges, as well as refusing to re-house them if they reject calls to leave.

In a letter to council leader, Steve Reed, Maritza Tschepp, of the Lambeth United Housing Co-operative, said the council’s actions were “vindictive and unfair” and said it was “out of step” with its own political ethos.

She said: "The members of these co-ops are being taken to court so Lambeth can gain possession of their homes – homes that co-op residents have maintained across this 40-year period – and sell them on the open market.

"Given the council wishes to attain the status of a ‘co-operative council’, we believe this policy is not only vindictive and unfair, it is extremely misguided.

"We naturally support the council’s community-led policies, but feel the attack on well-established communities is deeply destructive."

Ms Tschepp, along with others members of the co-operative, are calling on the council to recognise their group as it seeks to form a “super co-op” that would manage other groups centrally.

She said: “Were this sensible solution to be employed, the credence it would give to Lambeth’s desire to become a ‘co-operative council’ is obvious.”

But a council spokesman said: "Occupants living in short-life housing always knew these arrangements were short-term.

"We understand those who have put down roots within the community do not wish to move.

"Occupants were never given tenancy rights and were only ever required to pay very low amounts in rent and in some cases have not paid any.

"For the past few years we have worked hard to find them alternative accommodation."