Property developers could be hit hard by the new government’s proposed cuts to the funding for social housing, warned an industry expert this week.

Writing in Property Mentor, market analyst Peter Franklin said that the changes could lead to scores of affordable property construction projects “grinding to a halt” throughout 2010-11.

Proposed changes to the planning system will also make future developments more difficult, Mr Franklin said.

He cited figures published by the National Housing Federation, which said that cuts to social housing funds and other changes were likely to slash the number of affordable homes projects by property developers by a massive 65 per cent – or by a total of 20,390 homes.

With 4.5 million people currently on the list for social housing and another 2.6 million people living in overcrowded conditions, Mr Franklin warned that the situation could rapidly deteriorate unless ministers thought very carefully about their financial decisions.

New Housing Minister Grant Shapps has already addressed the issue, albeit in a gloomy manner, asserting last week that around 150 social housing developments face being scrapped due to the £610 million public debt that he is charged with cutting.

The government now plans to axe £100 million from the National Affordable Housing Programme, which was meant to make possible the construction of 59,000 new properties by the end of the 2010-11 financial year. The cutback will now reduce the number of houses being built by 1,453, warned Mr Franklin, going on to warn that “many property developers who have invested millions into developing sites for new property developments are now facing the prospect of having money promised to them by the government withdrawn.”

The National Housing Federation is seeking a meeting with the minister to discuss the crisis.

With the new Conservative-LibDem coalition government setting out its stall for the next parliamentary session, property developers and building companies are anxiously waiting to see what can be done to improve the sluggish state of British construction.

Although some 4.5 million people are currently on waiting lists for housing – a record number – fewer houses are actually being built than at any time since World War II, and the recent collapse in the value of development land cannot be blamed for the entirety of the problem.

Property developers have repeatedly complained about the long-winded and complex planning process that is currently required before construction can begin – and government proposals to give local councils increased powers in relation to planning could increase the red tape burden.

Planning and urban regeneration experts are calling on ministers to ensure that any planned changes to the UK planning regime are properly trialled and tested before being rolled out nationally, in order to prevent the stifling of any recovery in the building market.

“A swifter and more flexible planning process is needed, together with a sustained increase in property prices, to enable currently mothballed sites to be developed,” Guy Jenkinson of property consultants Bidwells told the Independent newspaper.

“This scenario could be hampered by the Liberal Democrat/Conservative plan to give more power to local government in planning decisions and is of concern to house builders who perceive a lengthening of the already lengthy planning process.”

Other concerns among property developers revolve around “green” proposals from the new government. Although the industry generally welcomes a focus on sustainable development and carbon neutrality, such measures could hamper a recovering property market.