Developers and councils may be able to use a a clause in the Housing and Regeneration Bill to avoid building social rented housing on their sites, according to Ken Livingstone’s Greater London Authority.

The clause could allow challenges to planning stipulations that quotas of affordable housing contain a certain amount of homes for low-cost rent, and not just shared ownership or intermediate housing.

This arises because clause 67 in the Housing and Regeneration Bill, published two weeks ago, defines shared ownership as social.

Alan Benson, head of housing and homelessness at the GLA, said: “This definition seems mad. I’d be astonished if developers didn’t use it to challenge policies.”

The GLA insists that half of any development be affordable and that at least 70% of that housing be social rented. However, social rented housing gives developers a much poorer return than shared ownership.

A spokeswoman for the communities department denied that developers and councils could use the definition to avoid providing social rented housing. “PPG3 makes clear that [they] should be separately accounted for,” she said.

The call came as the Conservative party attacked the bill in the House of Commons. It branded proposals for a Housing and Communities Agency as a mechanism to create a “bigger state and bigger targets”.