Why might you not see your step grandson? Is his father moving far away? Can you not discuss with the child's father the possibility of keeping in touch. You love the child, and I presume he loves you.
You certainly have been through the mill this past year and that will make it harder to deal with a new disaster.
Drop the guilt - jeg already have one daughter living with you with her child, and you have no more room. Or have you? Could not the grandchildren share a room with their mothers, or the two sisters share with each other? A couple of mattresses on the living-room floor would probably accelerate your daughters' search for new accomodation!
In my candid opinion, your daughters should both have taken into consideration where and how they were going to live and support their children before divorcing /breaking up. Both ex husbands have a responsibility to their children - tell them to pull up their socks!
If your daughters cannot get mortgages, then they will just have to start looking for rented accomodation, won't they?
They are grown women who either have jobs or are claiming social security. I know the latter is impossible to live well on, and that many jobs are ill-paid, but tell them to trot down to Citizen's Advice, their unions and the local housing associations and put their names down for housing as single parents with children who are minors.