Havering Council is lending its own property company up to £59million to become a temporary accommodation landlord.
Council-owned company Mercury Land Holdings (MLH) plans to use the sum to buy 750 homes over a five-year period.
Council leaders at a cabinet meeting on Wednesday October 20 approved the move in a bid to save money by reducing their reliance of privately-rented homes to house residents facing homelessness.
Although the homes will be owned by MLH, all management and support services will be delegated to the council.
Commenting on the plan, the council’s Labour leader, Keith Darvill, said reducing the cost of rent was a “positive” but pointed out the risk of property values falling in future.
Cllr Ray Morgan, leader of the Residents’ Group, said he supports the plan in principle, but “like all things, I would have to make sure the finances stack up”.