Anne Johnstone investigates the problems facing older owner-occupiers who are living in some of the worst conditions in Scotland.

LIKE lots of modern social policy, the idea looks splendid . . . on paper. It's based on the assumption that Britain's new-fangled property-owning democracy is stuffed with a hybrid species known as ''income poor but capital rich''. Lots of them are pensioners who own their own homes but are too poor to repair or upgrade them.

With cash-strapped councils shelling out less each year in repair and improvement grants, how will the wrinklies tackle the icy draughts and rising damp? Simple. They will unlock the pot of gold tied up in their treasured bricks and mortar using an equity release scheme, available from banks and building societies. The lender foots the bill for the work in return for a stake in the property, recoverable when it is eventually sold.

In typical pioneering spirit, the York-based Joseph Rowntree Foundation recently set out to put theory into practice using 40 local low-income homeowners as guinea pigs. They failed. In a report out today, JRF admits that, even with their expert help and the offer of non-commercial loans via the foundation's housing trust, not one of the 40 secured an equity-release loan.

The biggest obstacle was persistence of the old ''neither a lender nor a borrower be'' mentality. ''Older home-owners are deeply reluctant to take out loans secured on their property, even if there are no repayments until they die or leave,'' says author Julie Cowans.

Secondly, it emerged that a number of legal obstacles inhibit non-commercial organisations, like housing trusts, from making the sort of loan the home-owners needed.

Thirdly, it turned out that most commercial products on the market are not suitable for those in lower-value properties or those needing a loan of #10,000 or less.

Do the Rowntree findings apply in Scotland?

''If anything the situation is even worse in Scotland,'' says Jess Barrow, housing and policy manager for Age Concern Scotland. Four factors feed into the Scottish situation. First is the virtual demise of repair and improvement grants in many council areas, and drastic cutbacks elsewhere since the ring fence around this money was torn down during local government reorganisation. Cash-strapped councils spend on statutory requirements like education and social work first. Everything else gets squeezed.

Figures from the Chartered Institute of Housing show that since 1995 spending in Scotland on improvement and repair grants has been cut by two-thirds, a cumulative cut of #166m. The figure is the subject of much buck-passing between central and local government. Ministers say local authorities and Cosla decide how to cut the cake. Councils say they can barely pay teachers and empty bins, never mind about replacing Mrs McGinty's rotten window frames.

Second, home ownership in Scotland is fundamentally different, because it is characterised by the thousands of former council tenants who exercised the right to buy their homes.

''The amount of equity in a lot of these properties is negligible,'' says Chris Smith, national co-ordinator of the Care and Repair Forum, the network of organisations offering help and advice to older people needing improvements or repairs to their homes. Financial institutions can't be expected to lend if there's not enough equity tied up in the property for them to be sure of getting their money back, especially if the home-owner is on a low income.

Hence factor three. Douglas Robertson, housing policy expert at Stirling University, says: ''There's lots of talk about equity release schemes but building societies are generally not interested in small loans because of the relatively large cost of fixing them.''

Some companies won't lend less than #15,000. Some won't lend on properties valued at under #60,000. Besides, many equity release schemes provide a regular income rather than the sort of one-off lump sum needed for a major repair.

So many of Scotland's poorest elderly home-owners can no longer obtain council grants and don't qualify for equity release schemes either.

Then there's factor four. Barrow says there needs to be a national debate about equity release because older people are expected to use the value of their home to top up their income and find residential care, as well as pay for repairs: ''It's only a limited pot of money. It's not going to pay for everything.''

So, although Age Concern Scotland publishes a popular fact sheet about equity release, the evidence is that few home-owners get further than the inquiry stage. Chris Smith says he knows of ''only a handful'' of cases of home-owners using equity release to fund repairs.

Charities like Shelter Scotland and Age Concern know that older owner-occupiers, especially the oldest (75 and over), are living in some of the worst housing conditions in Scotland - draughty, cold, damp, tumbledown.

With more people surviving 10, 20, even 30 years into retirement, the situation could get much worse. Chris Smith quotes the typical case: ''A couple retire. The male dies and the lady, who has limited means and has never done any maintenance, struggles on till things start going wrong, then makes do.''

What needs to be done to reverse the situation? Chris Smith says: ''We need flexible financial products which allow people on low incomes not to pay interest over the period of the loan. Cold, damp houses kill old people. If the Government is looking at social inclusion, it needs to look at this.''

Clearly, we also need to persuade pensioners that borrowing isn't a form of moral degeneracy.

Recent research indicates that middle-aged people are more relaxed about credit, so attitudes are changing. Robertson says we need a national debate about the responsibility of ownership and what home-owners should be expected to fund from equity. He also believes we need to examine the structure of a housing finance system where lenders will advance a loan on a property, even if it's in dire disrepair, so long as they are confident of getting their money back on the deal. The American secondary mortgage system deters lenders from ignoring property maintenance issues.

Rowntree calls on the Government to bring forward legislation to allow non-commercial organisations like housing associations to run their own equity release schemes. In Scotland the Scots Parliament will decide such issues.

On a broader level, if we are to avoid the spectacle of 21st-century pensioners living in nineteenth century-style squalor, maybe housing policy needs to start climbing the political agenda again after nearly a generation in the wilderness.