Cuts to the national housing budget will be so extreme that the Government will only be able to fund 243 affordable homes in London and the South East up to March 2015 beyond those in the previous government's spending plans, according to new research.

The National Housing Federation says the amount of new money – under expected budget cuts of 50% – will be so low, and so much of it required to fund homes already planned, that ministers will only be able to fund a handful of additional new homes.

If the Government had decided to protect the national housing budget, and maintained regional spending at around £1.6bn per year, up to 103,000 affordable homes would have been built in London and South East up to March 2015 beyond those that have already secured funding under the previous government’s spending plans.

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In 2009/10 alone, around 30,000 new affordable homes were delivered in London and the South East.

With the affordable housebuilding programme effectively grinding to a halt in London and the South East over the course of the current Parliament, massive damage will be visited upon the local economy – with 156,000 jobs being axed or not created by 2020, and £32bn worth of economic activity being lost.

The Federation believes that the region is so crucial to the health of the economy that the slump in affordable housebuilding could trigger a double-dip recession.

The new findings blow a hole in the pledge of Housing Minister Grant Shapps to deliver more homes than New Labour.

Federation chief executive David Orr said: "The impact of the expected cuts to the housing budget will bring the building of affordable housing effectively grinding to a halt over the course of this Parliament.

"The slump in affordable housebuilding in London and the South East will not only be bad news for millions of people on waiting lists in the region, but it will be a hammer blow to the regional economy – which would be the powerhouse of any expected economic recovery.

"Grant Shapps said that building more homes would be the gold standard for the new government, but if he is only going to be able to deliver 243 new affordable homes in London and the South East this standard will prove to be made out of base metal."

(CD)