Some 200 squatters have taken over an entire housing estate rented by Lambeth Council, costing the local authority hundreds of thousands of pounds.

The council has as yet been unable to evict the squatters who since April have occupied approximately 40 flats in Limerick Court – on the border of Streatham and Balham – and council critics have warned it could be months before they are out.

The illegal occupancy is the latest chapter in a temporary housing scandal which is set to see the council waste £14m by the end of this financial year.

The mass squat has angered some local residents who are kept up by late night parties, and many feel threatened by “shady” people loitering round the estate.

“The council needs to put a stop to this now,” said Lib Dem housing spokesman councillor Jeremy Clyne.

“But the council could have a real problem here – sometimes it can take months or even years to successfully remove squatters.”

The council was set to give back the estate in Atkins Road to its owners after renting it for use by residents seeking temporary accommodation.

But after moving out the residents at the end of its lease, the council failed to secure the properties well enough and the squatters moved in before the landlord took possession.

Now Lambeth is having to continue to pay rent – estimated to be up to £36,000 a month – to the landlord while the squatters still occupy the flats.

“It’s a scandal,” said Coun Clyne. “To handle this so badly that the council lost control of a whole set of blocks is just not good enough.”

He estimated costs - including legal fees and repairing the damaged properties -could run to £500,000.

Dulce Lopes, 31, who lives in Atkins’ Road opposite the estate, said the area had gotten worse since the squatters moved in.

She added: “It feels more dangerous here now. Some shady people stand opposite our house and cars and people come and go from there late at night.”

Many residents reported noise from late night squat parties. The grounds of the estate are littered with broken alcohol bottles, burnt out fires, graffiti, and empty beer cans.

Chris Cook, 61, from the neighbouring Weir estate said it was “terrible” council money was being wasted on paying for the squat when there were so many improvements needed in council properties.

A spokeswoman for Lambeth Council said following the squatting, it immediately set the legal processes in motion for eviction.

She added: “We've done everything we can to remove the squatters as quickly as possible, but ultimately squatting is an illegal and antisocial activity that results in cost to the tax payer."

Details of the bungled handover of Limerick Court were published in a council report investigating the disastrous temporary accommodation overspend by the council’s housing department which cost over £6m last year and is set to cost a further £8m this year.

Hundreds of properties lay empty because the council overestimated temporary accommodation demands, signing huge contracts with private landlords for accommodation that was not used.