Lambeth's ALMO (Arms Length Management Organisation) failed to attract majority support from tenants and leaseholders, the Labour-controlled council has been forced to admit.
The Council has put out a statement that 51 per cent of those voting in the three-week ballot voted in favour, but figures extracted from the Council reveal that taking into account the substantial "don't know" vote only 42 per cent voted in favour.
The Council was still a week later claiming victory with a statement on the web site saying that it was on track to receive the £200m plus in funding for its decent homes programme.
Guidance from the DCLG makes clear however that the council has to prove "clear support" for the ALMO.
Turnout was put at 8,385 (only 29 per cent), of which 1,505 (18 per cent) were "don't know votes". Residents voting in favour totalled 3,518 (42 per cent) while 3,362 (40 per cent) voted against. Leaseholders voted strongly against the proposal.
The result follows a controversial third of a million pounds propaganda campaign by Lambeth to persuade council residents to back the ALMO. It culminated in extensive canvassing and door-knocking with council employees being paid £18 an hour overtime to take part.
Liberal Democrat Housing Spokesperson Cllr Jeremy Clyne commented: "The official government guidelines state that 'local authorities are obliged to demonstrate clear support for the ALMO option'. Whatever way you look at it this result does not show 'clear support'."
Lambeth Lib Dem leader Cllr Ashley Lumsden said the ballot result was "no mandate to be going forward. Consensus is needed to give the ALMO legitimacy. The council has spent some £300,000 on propaganda and spin - that means about £75 to secure each "Yes" vote."
Cllr Clyne added: "Questions will inevitably be asked about the circumstances in which the council conducted its campaign and behaved up to and during the ballot, as well as the way it extended the closing date for returns. Many people complained about not receiving ballot papers while we have heard of postal ballots getting into the wrong hands."