Almost half of new “affordable” homes are likely to be built in London under the plans unveiled in the spending review last week

A provisional analysis of the reformed social housing funding regime, conducted by the Chartered Institute of Housing (CIH), suggests that 47% of new homes would have to be built in London, where higher rents make the business model viable.

Affordable housing provision is currently spread much more evenly across the country. In 2009/10 only 24% of completed social homes were in London.

The CIH suggests that under the new regime, only 2% of homes would be built in the North-east, and 2% in the east Midlands.

Last week the government said it would cut social housing funding by 50% over the next four years, with £4.4bn available to build 150,000 homes. Housing associations will be able to raise rents for new tenants to 80% of market rates, in return for the amount of grant per home being cut by about a third.

However, this means that areas where rents are low will suffer grant cuts, but little increase in income, and therefore struggle to make schemes viable.

The spending review also signalled the effective end of the £1bn housing market renewal programme to regenerate areas of the north of England and the Midlands, and the government’s £500m funding for the Thames Gateway regeneration.

In addition, housebuilders and the CIH have expressed concerns about the ability of large estate regeneration projects, such as Elephant & Castle in Southwark, Kidbrooke in Greenwich and Park Hill in Sheffield, to proceed. Previous tenants had been promised new homes at the same rent, but lower government subsidy may make this unviable.

A government source said developers might have to use innovative cross-subsidy models to keep tenants at lower rents. Richard Capie, director of policy at the CIH, said: “These changes raise questions about regeneration schemes where tenants need to be rehoused. Developers might encounter significant opposition from tenants who want to preserve their rent rates.”