Councils could find themselves with a loss of £6bn in contributions from property companies due to a slowdown in development caused by the current economic crisis.

The official target of 240,000 new homes to be built in 2009 is likely to be nearer to 80,000 with many housing projects ground to a halt due to lack of finance.

Local councils generate income from developers by giving planning permission in return for affordable housing and monetary contributions, so the slowdown in developments will have a direct effect on their income.

The reduction in mortgage loan availability has left many unsold properties, and this combined with the price of finance for developers has left the whole industry in a tight spot.