Campaigners at the National Housing Federation are also warning that the planned budget cuts could mean more than half a million people are added to housing waiting lists.
The number of homes being built has slumped to its lowest level since the Second World War with just 123,000 built in 2009/10.
A 40% cut to the affordable housebuilding budget would mean the budget between 2011/12-2019/20 would be reduced from £28.6bn to £13.1bn – a fall of £15.5bn.
The Federation estimates spending cuts of 40% would reduce the number of affordable homes built between 2011/12 and 2019/20 from 426,000 to 197,000 – causing huge job losses in the construction industry over the next decade.
Federation chief executive David Orr said: “It is clear the amount of public money available to fund various activities in the future is going to be tight.
“However, given the scale of the nation’s housing crisis, it is critical that the nation keeps building affordable housing.
“Over 31,000 jobs would also be lost from the construction industry every year and cost the economy £5.6bn a year in lost activity – if cuts on this scale were introduced.”