A housing association says squatters are holding up its plans to renovate a building in St Paul's to create affordable homes.

Places for People says it wants to help first-time buyers and families urgently in need of housing by refurbishing 87 Ashley Road, a four-storey Georgian townhouse that it owns.

But the building has been illegally occupied since April and is now home to a group of 20 squatters.

The squatters, a group of men and women who say they are taking good care of the building, are refusing to move, claiming Places for People has not made its intentions for the house clear.

One of the squatters, known only as Bart, said he would be willing to move out if he was sure Places for People was creating social housing and not private homes for the open market.

An eviction notice was served after Places for People won a county court battle over the squatters.

But when bailiffs called at the property to evict the occupiers, it emerged that they had not received seven days' notice of the eviction date and were legally entitled to stay temporarily.

Bart said the squatters could still be evicted from the house, formerly owned by Bristol Churches housing association, and they were trying to reach a settlement with Places for People.

Beth Hearn, spokeswoman for Places for People, said further legal action was being pursued. She said: "The house has been illegally occupied by squatters for the past two months – causing a delay in helping local people access affordable housing, and causing significant maintenance issues at an added cost to ourselves. The properties will provide affordable homes for a number of local people."

She continued: "At Places for People, we are committed to creating sustainable communities. We offer a complete range of housing tenures, as well as local facilities such as schools, nurseries, employment and transport links - all of the things that contribute to making communities prosperous, vibrant, popular and therefore sustainable in the future.

"Unfortunately, this situation is significantly delaying our attempts to provide affordable housing to St Paul's. We want to completely refurbish the property and rent out to young people at affordable rates.

She added: "The people squatting in the house wrongly think we want to develop the building and sell flats for high prices."

Bart, who has been squatting for several years, says the building, called Unity House, has been empty for three years.

He said: "We've not been told what Places for People are planning to do with the building.

"Nothing's been lodged with the council and some of their plans have been opposed by St Paul's Unlimited. They say they want to help first-time buyers but they're not going to be helping people on the homeless register. It would be different if the company were putting the building to good use."

Squatting itself is not a criminal offence. However, it is illegal to get into a property by breaking in or damaging windows and doors. In some cases, squatters can also be prosecuted for other offences. There is a risk this could happen to squatters if they do not leave when the landlord gets a court order, or if a person who normally lives in the property, or has a right to move in (such as a new tenant), asks them to leave.