Housing associations have sounded the alarm ahead of the spending review after learning their public funding is set to be halved.
The cut would cause problems for councils as the overall supply of new affordable homes would be severely limited, though it would not directly affect council house building and improvement.
According to the National Housing Federation, housing associations’ plans to build 270,000 over the next decade would “virtually grind to a halt”.
It said waiting lists for social housing stood at 4.5m, while new building of all kinds slumped to a post-war low of 113,000 in 2009-10.
NHF chief executive David Orr said: “Brutal cuts of 50% to the housing budget would effectively shut the door on an entire generation which would be left with little hope of ever being allocated a social home.”
He said cuts on this scale would “blow a hole in the pledge of housing minister Grant Shapps to deliver more homes than New Labour”.
Alistair McIntosh, lead officer of the National Federation of ALMOs, which provides arm’s-length management of homes for some councils, said the real test would be whether Mr Shapps made good on his promise of financial freedom for councils to build homes.
Under this system, councils would keep all the rents and sales receipts they collect instead of paying into a government account used to subsidise councils with high housing debts.
The Association of Retained Council Housing, which represents councils that own homes but do not have ALMOs, has welcomed Mr Shapps’ move but has voiced concerns over the financial details.
Sarah Webb, chief executive of the Chartered Institute of Housing, said: “The likely cuts of over 50% for new affordable housing will decimate the new build programme at precisely the time when our housing market is at its most fragile and we should be building more homes to meet demand.
“CIH is already exploring new ways to fund house building which use less public money. However, the last 100 years have shown that public money will always be needed to build homes that people can afford to live in.”