UK non-profit housing associations have reacted with dismay to the news that American private equity firm Blackstone is investing in the UK social housing market.

Blackstone have bought a 90 per cent stake in Sage Housing, a social housing provider that makes a profit from its activities. Legal representation for the National Housing Federation has objected to the move.

The acquisition, which took place last year, means the private equity giant can now bid for, win, and rent out sizeable blocks of flats that come under the 'affordable housing' category.

The move puts Sage and Blackrock in direct competition with Britain's regular housing associations, which were not established to turn a profit.

A report in the Financial Times said Blackstone would likely stay in possession of the flats for "five to seven years" before putting them back on the market.

With Blackrock's capital behind it, Sage has been able to outbid traditional British housing associations. As the largest private equity real estate manager in the world, Blackrock has huge purchasing power.

According to government figures, less than 3 per cent of organisations permitted to operate social housing are for-profit. Such profit seeking entities have been allowed to enter social housing since 2010.

Their motivations stand in contrast with traditional housing associations, who are generally charities aiming to provide those on low incomes, and the vulnerable, with accommodation. Non-profits purchase homes from developers - but they also develop land themselves.

Last year, more than a quarter of new homes were built by housing associations. Around 10 per cent of the UK population live in housing association homes, according to the NHF.

Resistance to firms like Blackrock is likely to be fierce among Britain's housing associations, of whom more than 900 are represented by the NHF. The body has already written to Sage explaining that it believes the use of 'housing association’ in its title is in contravention of the Housing Associations Act. Sage subsequently removed 'housing association' from its name.

Sage has been joined by a number of developers that have entered the affordable housing sector with a view to turning a profit. Among them are insurer Legal & General, which announced its plans very recently; and British Land, who launched its own for-profit affordable housing operation around a year ago.