Council chiefs have said future housing projects will be subject to spot checks and greater scrutiny after £5m of taxpayers’ money was squandered on a heating system that never worked.

Lambeth Council is yet to complete work on the combined heat and power (CHP) boiler project on the Roupell Park estate – which aimed to provide more efficient heating to 569 homes – but said it would not allow the mistakes of a major housing regeneration project to be repeated.

Developers, who started work on the project in 2004, ran into difficulty during the project’s final stage, leading to millions of pounds being wasted. Lambeth’s executive director of housing and regeneration, Sue Foster, described the failings as "unacceptable" and said there were "lessons to be learned".

She said future developments would be subject to health checks and said the council now carries out spot checks on tenant management organisations (TMOs) to ensure greater scrutiny.

She said: "The CHP was an ambitious and complex project that stretched over many years and political administrations.

"While well intentioned, the sheer scale and complexity of the project meant it ran into practical difficulties, the extent of which were not realised until it was too late and money had already been committed.

"Overspends of this magnitude are clearly quite unacceptable.

"There are certainly lessons to be learned from this failed project.

"My focus now is to ensure this sort of overspend cannot happen again."

At a meeting of the council’s corporate committee last month, councillors revealed former housing contractor Alex Watson-Jones, who was allegedly responsible for a separate £3m fraud against the council in 2005, also worked on the Roupell Park development.

Earlier this month, the council leader, Councillor Steve Reed, wrote to Justice Secretary Ken Clarke urging him to rethink a decision not to prosecute Watson-Jones, arguing the Fraud Prosecution Service case had been "close to incompetent".

He is still waiting for a response.