The £8 billion social housing budget faces cuts of up to 80 per cent according to reports from Channel Four News.
Chancellor George Osborne will announce cuts of up to £83bn in Wednesday’s Comprehensive Spending Review and the affordable housing budget channelled through the department for Communities and Local Government is understood to be a major loser.
Housing Associations warned the broadcaster that the move would see the number of new social houses built collapse to just a few hundred per year.
The associations said the 40 per cent government subsidy for social housing had helped deliver 50,000 new homes last year, nearly half of the entire stock of new homes.
Meanwhile the Chartered Institute of Housing director of policy and practice Richard Capie told the International Social Housing Summit in the Netherlands he was expecting the cuts to be savage.
He said: “It has been suggested to me 50 per cent; to be honest if we get 50 per cent I will be very, very pleased. I think we will be looking at a cut of 80 per cent if not more.”
Mr Capie fears the cuts, expected to be between 25 and 40 per cent, will be made using the 2006-08 settlement of £3.9 billion rather than the £8.4 billion settlement for 2008-11. This would mean the effective cuts to capital funding will be much higher than expected.
Mr Osborne insisted the cuts were necessary to safe guard the future of vital services.
He said: “The priority has been to target waste and welfare, to invest in our healthcare, to have real increases in our school budgets and to invest in the things that are going to make our economy strong.
“We have got to make some tough decisions but the priority is healthcare, children’s education, early years provision - particularly for some of our poorest - and the big infrastructure developments like Crossrail, Mersey Gateway, the synchrotron, broadband.
“Those things are actually going to get us out of this stronger and able to pay our way in the world.”
National Housing Federation chief executive Stephen Timms told the programme he strongly opposed the decision.
“What we’re seeing now is a sustained assault on people who are in poor quality homes, who are homeless or badly housed. Even those who are in homes are likely to lose them because of the housing benefits cut.
“This will not just have a profound impact on people who are homeless but it will take 40,000 construction jobs out of the economy.”
Mr Timms said of the child benefit cuts: “It feels economically incompetent to me. “If there’s going to be more cuts in child benefit, as well as the £12bn VAT rise in January, that will have a big impact on household income and therefore spending.
“Therefore on the economy, the risk to the economy and return to growth to the economy I’m particularly concerned about.”
Mr Timms said he felt Mr Osborne’s plans for reducing the deficit were going “a lot further than we would have gone, to an extent which puts the recovery of the UK economy at risk.”