By the late 1950s, the government's policy of encouraging owner occupation ran into problems, limited by high interest rates. In 1958, plans were made to allow 95 per cent mortgages on certain categories of property. Building societies agreed to pay an increased rate of interest on government loans used to fund mortgages. This plan was included in the House Purchase and Housing Act of 1959.
By 1960, it was clear that the Conservative's policy of stimulating the private rented sector had failed. The Minister of Housing and Local Government, Henry Brooke, proposed reviving the Housing Act. Under his scheme, the Exchequer would make loans to housing associations to build properties to let. In spite of some opposition from the Treasury, Brooke's ideas on housing association were included in the Housing Act of 1961.
The Conservatives believed that high interest rates were preventing higher wage earners from leaving council housing. The Treasury, however, rejected tax concessions to building societies, and instead made increased funds available to housing associations. Setting up a Housing Corporation to encourage housing was proposed, and was assisted by a loan of £100 million. The scheme was included in the 1963 Housing Act. Housing associations became more central to government policy after the Rachman Scandal highlighted dubious activities of unscrupulous landlords in 1963. Labour pushed for the control of rents in the private sector, but the government resisted the re-imposition of rent controls.