The latest leak about tomorrow’s Government spending plans reveals housing ministers are planning sweeping changes to the way councils charge rent to finance them.
The Government is also said to be planning to phase out council housing for life.
In future, council tenants will be charged nearer the going market rate, to release cash for building programmes.
Ministers are expected to introduce a “flexible tenancy” for people who move into council housing for the first time.
According to a report by the BBC, tenants will be means tested to see if they still require help with housing from their local authority.
The news comes as the National Housing Federation claimed the spending review would see house building grind to a halt in the south
Its sources say the settlement will be less than half the current £1.6bn funding for social homes, although some reports fear cuts could be as high as 80%.
NHF chief executive David Orr said: “The impact of cuts of this level would lead to the building of affordable housing effectively grinding to a halt over the course of this Parliament.
He said the impending cuts to the housing budget could be so extreme that the Government would only be able to fund 243 affordable homes in London and the South East – beyond the 12,700 already planned – up to March 2015.
“Such a slump in affordable house building in London and the South East would not only be bad news for millions of people on waiting lists in the region, but it would be a hammer blow to the regional economy which would be the powerhouse of any expected economic recovery.”