The council has given the green light for the creation of a master plan which could see 1,200 new homes built on three estates as residents there mobilise to block the plans.
Last night cabinet members allowed Circle Housing Merton Priory (CHMP) to suspend renovation work promised to residents on High Path, Ravensbury and Eastfields estates for the next 18 months while a 'master plan' is created laying out designs for a full-scale regeneration of the properties.
The housing association is now looking at building a third more homes than initially mooted, up from 900 to 1,200 which would fulfil a third of Merton's 10-year housing target set by the Mayor of London.
The announcement comes after Mitcham and Morden's MP revealed she receives 240 complaints a year about poor CHMP maintenance repairs.
Residents of Eastfields in Mitcham and Ravensbury in Morden, who feel they have yet to be properly consulted about the regeneration plans, have formed new residents associations to fight for their rights.
Architects have already started mapping out plans to demolish and rebuild their homes which CHMP argues will be a more sustainable way of bringing them up to the Decent Homes Standard promised to Merton Council when its transferred its housing stock to CHMP in March 2010.
Councillor Stephen Alambritis, leader of Merton Council, promised the council will keep a "hawk's eye" on the housing association throughout the consultation period up to Spring 2015, and said it will conduct its own independent consultation with residents to ensure their voices are heard.
But he said: "There was a conditions survey done on the whole estate a couple of years ago and that quite clearly showed there were issues permanently with the concrete prefab in Ravensbury.
"Eastfields was a 70s estate that has issues with lacking height which is not good for residents and High Path has a lot of problems of all conditions."
"They came to us talking about a regeneration of these three estates and cabinet have said go ahead with the next stage, pulling together the master plan and I think it's going to be good, but when you come back with the master plan we need to be sure it fits in with our aspirations and the residents'."
He said the redevelopment, which will begin in Spring 2016 if the master plan is approved, would address issues of overcrowding and provide space for shops and workshops, CHMP said it is optimistic many residents, faced with up to 12 years of building work, will be able to move directly from their current homes to new properties built on vacant land on the estates to minimise disruption.
Those who are forced into temporary accommodation will receive a 'home loss payment' for each move, while all tenants will be awarded a 'disturbance allowance' to cover costs of utilities like new carpets and curtains.
Current proposals indicate a financial offer of market value plus 10 per cent and a £4,700 disturbance allowance will be made to leaseholders and freeholders who choose to leave their estate, with a choice between shared equity and shared ownership of a new home within the regenerated estates for those who choose to stay.
Landlords living outside the estates could be offered market value plus 7.5 per cent, although CHMP stress all financial offers will be subject to the result of the master planning process.
CHMP is currently finalising arrangements for 'early buy-back arrangements' for leaseholders and freeholders who want to leave before regeneration begins, which they say will allow them to acquire homes they may need at a later date anyway.
Jana Stanley, High Path leaseholder who is considering remobilising a residents' association on the South Wimbledon estate, said: "In the next 10 years there's a lot to be done. Personally I'm in support of redevelopment. Car parks could be moved underground and outbuildings could be used and they could make the buildings taller.
"Increasing the number of houses in London would be great but people cannot live for the next 10 years with holes in the roof. Circle Housing still has a responsibility to maintain buildings and they are not doing it."
CHMP has promised to continue undertake responsive repairs on the three estates during the master planning period, within the same timescales as repairs on other estates.
Wayne Hainsworth, CHMP managing director, said: "We welcome the Cabinet’s support in giving us time to consider what plans for modern, energy efficient homes could look like.
"We’re committed to a full, open consultation with residents so they can have their say about the regeneration proposals – this is still at an early stage and no final decision has been made.
"It’s our duty to ensure residents’ homes are in a good condition and repairs will continue on the three neighbourhoods throughout the masterplanning and regeneration process.
"Our long-term aspiration is to create new homes that far exceed the Merton Decent Homes Standard."
The 18-month period of suspension of CHMP's obligation to carry out works on the three estates bringing them up to the Decent Homes Standard will formally begin on Wednesday, July 9.