Budget for social housing over the next four years will be reduced to £2bn

Funding for housing and regeneration is to be to cut by 75% by 2014/15 after the biggest shake-up in decades.

Social housing funding of £8.4bn between 2008 and 2011 has been cut to just £2bn over the next four years, which will be enough to pay for the existing commitments to housing associations.

Ultimately this will be replaced by a new form of tenure where homes are let at 80% of the market rate.

The government says the two together will create 150,000 homes over the four years, which implies a rate of build broadly similar to construction today.

Housing minister Grant Shapps denied it was the end of social housing as we know it. He said: “This will give housing associations flexibility to build more and borrow to fund new homes. But this could also [be] attractive for institutional investors to put money into.”

Meanwhile all of the communities department’s regeneration and growth programmes, such as the Thames Gateway, housing market renewal in the North, and housing growth will have to bid for cash from the £1.5bn regional growth fund, which is also picking up former Regional Development Agency commitments.

The government also confirmed that between £200-250m a year will be set aside to pay for the proposed New Homes Bonus designed to reward councils that allow development in their areas.

Design quango Cabe is to be scrapped after the culture department said it would not continue funding it, and the communities department refused to take full responsibility.

Shapps said: “We¹ll look at whether some of the functions can be incorporated into our work at communities department.”