Dublin City Council is facing a "subprime mortgage" crisis on lendings of more than €300 million to affordable home buyers according to a report presented to councillors.
A sample study of 476 borrowers in arrears on their council mortgages found more than 90% were unsustainable.
Dr Dáithí Downey of the Dublin Regional Homeless Executive told the council's housing committee that to bring repayments to sustainable levels the amounts would have to be reduced by an average of €5,500 a year.
And he said this would do nothing to address existing arrears of over €15m.
Housing Committee chairperson Sinn Fein Councillor Críona Ní Dhálaigh said the figures were "absolutely alarming and shocking" and that the priority had to be stopping these households becoming homeless.
Dr Downey said the council will be coming up with a set of proposals on how to deal with the problem including debt equity swap, rent-to-mortgage and debt discharge.
But these proposals will have to go to Government and there is a question of who is going to pay.
He said that a study of a representative sample of 44 households in arrears found that their income was 30% below the national average and their earning were "precarious".
Under the terms of the affordable housing the city council was only allowed to lend to those who had been turned down by two financial institutions.
Dr Downey described it as "a regulated form of subprime lending".
The arrears problems developed in mortgages granted after 2002. Most got into arrears within two years and most have 26 year mortgages.
He said the borrowers felt trapped and "pauperised" and most favoured a mortgage-to-rent solution which would allow them to stay in their homes.
A mortgage is considered sustainable where under 30% of earnings goes on housing costs and of the 44 studied only two met this criteria.
Most are on forbearance which means interest only repayments and 14 of the sample could not even afford these repayments.
The interest only forbearance can only last a total of three years and many of these are now coming to that deadline, he said.
Council mortgages often involve shared ownership where the borrower gets half the ownership of the property and pays council rent on the other half.
Previous reports have found that mortgage arrears have grown from €3 million in 2007 to more €15 million last year.
Of a total of 2,629 mortgages holders, only 63% of the total repayments are being made. The council has repossessed over 100 properties in the past six years.