The body charged with overseeing the finances of housing associations must act to avoid a crisis in the way they are run, warns a Commons committee.

Members of the public accounts committee warned on Wednesday that although progress had been made in stopping failures by housing associations and registered social landlords serious problems for the Housing Corporation lay ahead.

There are growing problems with rent arrears, late payment of housing benefit receipts and falling demand for the registered landlords.

The committee recommended that the corporation, a non-government body sponsored by the DTLGR, should not lower financial standards because of pressure on resources.

It also warned that social housing groups registered with the corporation should not be allowed to diversify into new types of business if they are at the expense of taxpayers' funds earmarked for investment in housing.

Committee chairman Edward Leigh warned that although there was good new the future was far from rosy and called for action.

"I am pleased that the corporation's work has contributed to keeping the financial sector financially sound in overall terms. However there are clear signs that the position is starting to worsen. The corporation must make it a top priority to monitor the weaker performers closely and take effective follow-up action as required," he said.