A cross-party coalition of local government leaders has called on Lords to back amendments to the Housing and Planning Bill.
In a joint letter to a national newspaper, the Local Government Association's (LGA) Conservative, Labour, Lib Dem and Independent group leaders pledged their support to amendments that would ‘allow councils to retain enough receipts from every home sold to be able to replace it in the same area'.
The letter, signed by councillors David Hodge, Sharon Taylor, Gerald Vernon-Jackson and Marianne Overton, called on peers to fight the Bill as it reached the report stage in the House of Lords.
Last week, housing minister Baroness Williams of Trafford changed the wording of the Bill to give the secretary of state power to force councils to sell ‘higher value' social homes, instead of ‘high value'.
The change raised fears the Government was attempting to widen its remit over what housing local authorities must sell in order to fund the extension of right to buy to housing association tenants.
LGA leaders fear the Bill in its current form runs the risk of reducing the number of genuinely affordable rented homes that communities ‘desperately need'.
The letter read: ‘Proposals forcing councils to make payments to government based on selling homes will hamper councils' ability to invest in new affordable council housing and are likely to have the unintended consequence of increasing homelessness and pushing more families into the more expensive private rented sector.'
It also criticised Whitehall's starter homes agenda, which aimed to build 200,000 homes to buy at a 20% discount.
LGA research earlier this year found the homes, which would be capped at £250,000 outside London and £450,000 in the capital, would be too expensive for most people in most parts of the country.
The letter continued: ‘Current proposals for starter homes carry a risk that a crucial supply of new affordable rented homes will be displaced and, despite the 20% discounts, they will still be out of reach for the majority of people in need of an affordable home.
‘Councils support the measures to boost home ownership – and starter homes are one of the ways this can be achieved, but we urge peers to back amendments allowing councils to decide how many starter homes, alongside affordable rented homes, are on each development to ensure they meet the needs identified by councils with their communities.'
The council leaders wrote: ‘New homes are badly needed and councils are keen to build them.
‘The LGA believes we will only see a genuine end to our housing crisis if we are able to get on with the job.'
The shadow housing minister in the House of Lords, Lord Kennedy of Southwark, claimed that an observer would be 'hard pressed to find proposals put forward by ministers at any point during the past few decades that is more badly thought through, technically deficient and lacking in basic building blocks than the Housing and Planning Bill'.
He suggested the proposals were pulled together quickly from a series of manifesto pledges because the Conservatives did not expect to win a majority in May.
He said there was an 'arrogance' about the way Whitehall believed it was acceptable to push through a Bill in 'such a sorry state'.
According to Lord Southwark, Labour peers and 'many others across the Lords' would be 'using their powers of scrutiny and persuasion to improve a very badly conceived Bill that, as it stands, will do far more harm than good'.
Shadow housing minister John Healey MP said the letter confirmed that Conservative ministers have 'lost the argument on the Housing Bill, even among their own councillors'.
He added: 'It adds to the growing opposition from all sides and all parties to the extreme elements of this Bill.
'With key votes due to take place in the House of Lords this week, it's not too late for Tory ministers to listen to Labour, housing experts and their own councils, and drop their damaging housing plans.'
Lords will debate the Bill later today.
