Waiting lists are already at record levels with 4.5 million people currently waiting for a social home in England, while an estimated one million children are living in overcrowded housing.
But just as the demand for new homes has reached new highs, the number of homes being built has slumped to its lowest level since the Second World War with just 123,000 built in 2009/10.
The Treasury has ordered Government departments to budget for cuts of 40% ahead of October’s comprehensive spending review.
A 40% cut to the affordable housebuilding budget would mean the budget between 2011/12-2019/20 would be reduced from £28.6billion to £13.1billion – a fall of £15.5billion.
The Federation, which represents England’s housing associations, warned that if the housing budget was cut by 40%:
* Around 230,000 affordable homes would not be built up to 2020;
* 570,000 people would be added to waiting lists for an affordable home;
* Around 283,000 jobs in the construction industry would be axed or not created by 2020;
* And the wider economy would also suffer, with the cuts reducing economic activity by around £50billion over the next ten years.
The Federation warned that the poorest communities would be hardest hit by the proposed cuts to housing and would have a series of damaging knock-on effects. Research has consistently found a link between bad housing conditions and poor health, low educational attainment and higher crime rates.
Cutting funding for desperately needed social homes would also call into question the Prime Minister’s pledge to "always looking after the poorest in our country".
The Federation estimated spending cuts of 40% would reduce the number of affordable homes built between 2011/12 and 2019/20 from 426,000 to 197,000.
The number of jobs losses sustained as a result of the huge reductions in grants would total 31,500 a year.
Federation chief executive David Orr said: "It is clear the amount of public money available to fund various activities in the future is going to be tight. However, given the scale of the nation’s housing crisis, it is critical that the nation keeps building affordable housing.
"If we don’t safeguard the building of affordable homes then hundreds of thousands of vulnerable people will be added to waiting lists already at record levels.
"Brutal cuts of 40% to the housing budget would effectively shut the door on an entire generation which would be left with little hope of ever being allocated a social home.
"Over 31,000 jobs would also be lost from the construction industry every year and cost the economy £5.6billion a year in lost activity – if cuts on this scale were introduced.
"We would urge the Government to closely consider the huge human, social and economic cost of failing to invest in affordable housing."
Have your say on this story using the comment section below