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Just 19,600 social housing units were finished in the financial year 2002/3, compared with 20,700 in 2001/2. Seven years ago, more than 30,000 social homes were built each year.

Although social housing starts rose marginally over the year – from 16,700 to 16,800 – figures for the three months to April this year show the downward trend continuing, with starts down 16% on the corresponding three months the year before.

A spokesman for the Office of the Deputy Prime Minister blamed the drop in completions on problems accounting for the number of houses built for affordable tenures – problems he said would be resolved by the next set of quarterly figures. But he conceded: "It is clear we are not going to return to the big build figures of the past."

However, housebuilders and housing associations said the number reflected more fundamental difficulties in the sector that would take years to be addressed. In particular, they pointed to a lack of government funding.

John Barker, chief executive of Moat Housing Group, said subsidy was not keeping pace with the rising cost of production: "The withdrawal of the local authority social housing grant will exacerbate the problem and probably lead to a dip in output."

Mark Leffler, regeneration director for Metropolitan Housing Trust, said registered social landlords were having to rely on section 106 planning gain agreements, where developers agree to build affordable or social housing in return for planning permission for other developments. "The government has been fairly parsimonious," he said. "We're forced to rely on section 106s."

Many in the sector feel the Communities Plan's reliance on brownfield land and regeneration areas such as the Thames Gateway could lead to a further fall in completions. Barker said: "The nature of housing development is that there are relatively long lead times, particularly on regenerating brownfield sites in the four growth areas." Leffler said: "Everyone recognises the Thames Gateway will be quite a long way off."

Pierre Williams, spokesman for the House Builders Federation, said the government's continued inability to tackle a bottleneck in the planning system meant there was no chance for private housing to take up the slack.

In contrast to the social sector, private housebuilding starts have recovered slightly – rising from 166,000 in 2001/2 to 167,900 in 2002/3. As a result, social housing now accounts for just 9% of total building starts, down from 16% in 1996/7.

The Housing Corporation's target for c0mpletions in 2003/4 is 28,500 homes.