Tenants face eviction from their council homes after agreeing to give them up in exchange for run-down properties – only to later find that accommodation offer from the council was withdrawn.

Lambeth has re-prioritised hundreds of “short-life” tenants – who in some cases have been in their co-operative homes for 40 years – on a social housing waiting list, in some instances “bumping them” above homeless families, in order to move them out.

The council then sell off the co-operative homes at auction for bargain prices to raise revenue – £32m last year – in a move widely criticised by councillors and tenants.

Maritza Tschepp, from the Lambeth United Housing Co-operative, said there were still hundreds of people living in up to 150 “short-life” homes who faced permanent eviction if they did not comply with the council’s rehousing scheme, adding the borough-wide problem was not isolated to one or two incidents.

She said: “People who do not engage with the council and who do not accept a final offer of housing will be made homeless and the only option available to them will be private landlords.”

Metal worker John Blackhurst, 54, and his author wife Karina, 53, spent 28 years renovating their £1.4m, Grade II listed house in Park Hill Road, Clapham.

They claimed council officers told them they had secured a new home through its Choice Based Lettings (CBL) scheme two weeks before agreeing to give up their family home.

Despite this, they were later told the new house they had chosen was no longer available and were now waiting for a final accommodation offer from the council, which they must accept or face eviction.

Mrs Blackhurst said they felt pressured to move and were shown dilapadated properties.

She said: “The past three years have been unbelievably difficult. [The council] do not treat you as legitimate human beings. It is almost as though we are criminals.

“We have taken care of the property and my husband has basically kept it standing.

“The council has never been responsible for any of the maintenance.”

Liberal Democrat councillor Jeremy Clyne said he would be raising the issue at the next council meeting.

He said: “This is not what the council has said it would be doing – we need to check whether this is complying with council policy.”

A council spokeswoman said they were seeking alternative accommodation for the Blakhursts, but said tenants should not to commit to leaving their current home unless their new house is confirmed as being ready to let.

She said: “This is standard advice that would apply to anyone moving home, and is advertised on our CBL website.”

Council housing auctions were on track to make the council £32m in the year up to March 2012, according to a cabinet report. The council claimed the cash will be used for improving schools, neighbourhoods and its housing stock – half of which was found to be sub-standard in 2010.

But, as the Streatham Guardian revealed last month, properties are being sold far below their market value, leading residents, councillors and campaign groups to stop the practice.

The council spokesman confirmed co-op tenants were being placed in a “very high priority group” on the social housing waiting list which it said reflected its “commitment” to finding them alternative accommodation.

But Jonathan Bartley, Streatham Green Party spokesman, said: “It is absolutely outrageous. It is a scandal.

“This is the most vulnerable [homeless people] who are paying the price for Lambeth’s drive to pay for its reckless spending deficit in the past.”