Thousands of families in Harrow are crying out for homes, but cuts in funding may make it more difficult for local authorities to address the issue.
Chancellor George Osborne announced in his Autumn Statement on December 5 that the New Homes Bonus, rewarded to councils in recognition of the pressures they and their communities face when new housing is built in their borough due to an increased population, would be scrapped in 2015 with the initiative receiving a £70million cut.
The remaining cash would be redirected to the London Local Enterprise Panel, chaired by the Mayor of London, prompting fears that Harrow Council will be stripped of any powers to take local action with a housing stock of 5,000 and with 4,000 on waiting lists.
Outside of London, the way the New Homes Bonus works will remain unchanged.
Councillor Keith Ferry, Labour's shadow cabinet member for planning and regeneration, said: "If the New Homes Bonus is essential for councils in Leeds and Manchester to fund the pressure of growth, why is London in general, and Harrow in particular, being short changed again by the Tory-led Government?"
Harrow Council recently sought to embark on a project to build 50 new homes as a trial for bigger projects, but their hands could be tied in the future due to this latest development.
Ben Wealthy, a Labour councillor who has lobbied for Harrow Council to invest in more housing stock, told the Observer: "It's yet another decision from the Tory-led Government which makes delivering new homes, alongside the necessary investment in services, harder.
"There are thousands of families in housing need in Harrow, spending Christmas lingering on waiting lists, many in damp or cramped accommodation.
"If Harrow Tories genuinely want a fairer borough they'll need to act and prioritise tackling the housing crises in the council's budget."
A council spokeswoman said: “We are currently embarking on exciting plans to increase our housing stock and develop more affordable housing in the borough, by looking at the potential for regeneration of some of our estates and a new ‘hidden homes’ scheme which involves redeveloping land such as garage sites.
"We will be drawing up these plans in more detail in the new year and as part of this will be considering the impact of the changes to the New Homes Bonus in London, as well as a number of other measures recently announced.”