The government is to give councils the power to tell housebuilders what types of housing they should develop.

Planning Policy Statement 3 (PPS3) requires councils to assess the housing needs of their localities, and then use this to determine what kind of private housing is approved. This is intended to correct the undersupply of family housing in some areas.

Yvette Cooper, the planning minister, said at PPS3’s launch that authorities could turn down schemes that failed to reflect housing demand.

Tim Lawrence, Taylor Woodrow’s strategic development director, expressed concern about the policy. He said: “I don’t see how we’re going to have the flexibility to respond to the market. That’s a big worry.”

The document scraps the 30 dwellings per hectare density rule, which was one of the key recommendations of Lord Rogers’ urban taskforce report. Cooper said councils were free to set lower density benchmarks in “exceptional circumstances”.

PPS3 also gives councils more freedom to set parking standards, and it includes measures to improve land supply.