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brokenbetty
A lot of properties were falling derelict as a result of London's population decline after the Second World War, and councils had several interests in buying up property. First, doing up old properties was cheaper than building new even then, they were the main social landlords and there was a lot of poverty and, as today, a lot of privately-rented 'accommodation' was in a terrible state (less frequent now, of course, but see the regular stories of 35 'migrants' living in one and a half rooms in Newham), and, finally, councils were looking to assemble larger plots of land (the land was often the main reason why they bought old houses, not the houses themselves, which were seen as lacking mod cons, cheaply-built, and eminently disposable), as the LCC had done before, to build estates, schools, and other public buildings, of which there were too few in many traditional Victorian neighbourhoods.
As BobbyBriggs says, property was cheap back then, and they also needed larger houses for larger families, as most estates had only up to three-bedrooms flats.
When I moved to Hackney, the council still owned a huge number of Victorian houses, which for the most part were then sold off cheap when the council went into financial crisis around 1999-2000.