Most local authorities will fail to deliver against targets for affordable housing in the next two years despite massive cash injections, a new report warns.

The report from the National Audit Office and the Audit Commission said that despite large amounts of funding, a national target, and affordable housing becoming a key corporate priority for local authorities in recent years, few authorities believe that they can yet meet the challenge to deliver large increases in affordable housing.

Only two percent of local authorities thought they would reach the amount of rented social housing required by 2007.

The problem is particularly bad in areas of high housing demand in the south of England, due largely to insufficient funding and a shortage of land available for development.

The report argues that the role of local authorities has evolved from using public funds to commission new house building to one where they have no direct funding for new housing but have significant impact on the supply of new homes through their control over planning.

However, many local authorities have not taken on the leadership role needed to convince their communities of the need for developing more affordable housing and to allay fears by involving people in how developments might be designed and delivered.

Local authorities also need to better understand the market place and the commercial risks faced by developers, said the report. In this way realistic positions could be taken from the outset in respect of the balance between social, intermediate and private housing, so that deals can be done with minimal delay.

Where local authorities are using good practice in relation to Section 106 processes, the time needed to broker agreements can be reduced from weeks to days, with savings to all parties.

The report also advises that where local authorities take opportunities to work with adjacent authorities to develop affordable housing, there is considerable scope for realising efficiencies through joint procurement of housing needs surveys and sharing of scarce planning and housing staff.