Just 102,570 homes were built last year, 13% lower than in 2009, and the lowest level during peacetime since 1923, according to the Communities and Local Government Department.
The number of homes completed by private developers plunged 18%, compared with a 3% rise for housing associations.
The country is now building less than half the 232,000 estimated homes needed each year in England to keep pace with rising demand.
The figures came as housing minister Grant Shapps set out the final design of the £1bn new homes bonus building incentive scheme, and unveiled the first allocations.
The Government estimates the new homes bonus will deliver up to 150,000 additional homes over ten years – the equivalent to twice the size of Blackpool – and support more than 11,000 construction jobs.
Local authorities involved in the first wave of the initiative will receive almost £200m in payments to reward them for approving developments.
Around 326 local authorities will share the first tranche of cash, with Tower Hamlets getting the most at £4.3m, followed by Islington at £3.7 m and Birmingham at £3.2m.
Other councils making the top 10 that will receive the most from the first payout include Manchester, Leeds, Bristol, Bradford and Milton Keynes.
The Government has pinned it hopes on cash-starved local authorities waving through planning proposals so they can receive matched council tax payments for every home built.
Affordable homes will receive 36% more bonus than market homes. This works out at a £9,000 payment on average to each B and D home or almost £11,000 for an affordable home.
Empty properties brought back into use will also receive the cash bonus for six years.
This would mean that a council allowing 1,000 units to be built could earn £10m to spend where they saw fit.
Grant Shapps said: “To kick start a house building revolution development needs to be backed by local communities rather than opposed by them.
“Rather than feeling the strain of new homes through extra pressure on local services local residents will feel the direct benefit as they get to choose how the money is spent.”
Communities Minister Andrew Stunell added: “I urge all councils to now work with residents to agree how the bonus can benefit them.”