Deputy prime minister John Prescott's former department has undergone an overhaul in the wake of the reshuffle last week, leaving the future of the sustainable communities plan in doubt.

After Prescott's departure from the ODPM to become minister without portfolio, the entity will now be called the Department for Communities and Local Government (DCLG), led by Ruth Kelly, the former education secretary. Prescott's number two, David Miliband, has take over from Margaret Beckett at Defra.

Questions have now been raised in the industry over the viability and future of the sustainable communities plan and the white paper on local government, due out next month. The communities plan had been sponsored by Prescott, and Miliband had followed the white paper closely.

Rural campaigners have predicted that Kelly's lack of experience in the field will lead to the demise of Prescott's crusade to demolish houses in the North and build 200,000 homes in the South-east.

Others have pointed out that Kelly's inability to convince members of her own party of the benefits of city academies while at the Department for Education & Skills does not bode well for taking on stubborn local governments.

But Dermot Finch, director of the Centre for Cities at the Institute for Public Policy Research, said the change of personnel at the top was not a problem. He said: "There is no suggestion whatsoever that the local government white paper will not go ahead - a lot of the work has been done already. Ruth Kelly will clearly have her own ideas and will bring her own substance and style to the department."

The department will retain responsibility for local government, housing and planning, Building Regulations and sustainable communities.

It is understood that Miliband did not take any ODPM briefs with him to Defra. Housing minister Yvette Cooper and local government minister Phil Woolas have retained their roles but Building Regulations head Jim Fitzpatrick has been moved to the DTI. He has been replaced by Angela E Smith.

Kelly pledged to focus on increasing the supply of affordable housing, which despite the government's promise of a "step change" in the South-east is still falling short of demand.

Speaking on Radio 4's Today programme, she said: "Housing is a huge priority and also a personal priority of mine. It's about building more social housing but also more affordable private homes. Over the next few years over 30,000 social homes will be built every year."

Despite Kelly's appointment, the departure of Prescott will be received with disappointment by housebuilders and contractors, many of whom saw the deputy prime minister as genuinely committed to regeneration.