Huge bills for fire safety work on residential tower blocks will “have a devastating impact” on the number of new affordable homes built in the UK, leading housing associations have warned.

Four of the largest social landlords in the country — Clarion Housing Group, L&Q, Network Homes and Peabody — said their ability to fund new development will be hamstrung by mounting costs related to the safety crisis exposed by the 2017 fire at Grenfell tower, in which 72 people died.

Unless ministers step in with extra funding to repair potentially dangerous blocks, landlords face a £700m remediation bill that will come at the expense of 8,300 affordable homes over the next five years, a 40 per cent fall from current targets.

The hit to affordable housing is another consequence of a crisis that has left leaseholders facing crippling costs, housebuilders on the hook for hundreds of millions of pounds of repair work and MPs struggling to find a way out of the impasse.

“This is not only disastrous for us but for those who cannot afford adequate accommodation,” said Clare Miller, chief executive of Clarion. “This will have a devastating impact on our ability to build new homes.”

Factoring in other housing associations, not-for-profit landlords to hundreds of thousands of tenants in affordable accommodation, the remediation costs would mean the “loss of many more thousands of homes”, said Kate Henderson, chief executive of industry body the National Housing Federation.

The building safety crisis began with the Grenfell fire, which exposed deficiencies in construction standards and alleged malpractice by the suppliers of cladding and insulation for the west London tower’s refurbishment.

The crisis has ballooned in the past year, with concerns now being raised about the safety of hundreds of thousands of flats across the UK.

The government has pledged £5.1bn to cover remediation work, but some estimates put the total bill for all buildings affected at three times that figure, and a bitter dispute is raging about who should pay.

Efforts to protect leaseholders from costs ran aground in parliament on Wednesday, when MPs rejected amendments to the Fire Safety Bill from the House of Lords that would have exempted leaseholders from footing repair bills, despite a rebellion by 32 Conservatives.

At present, leaseholders face the bills for temporary fire safety measures until their homes can be signed off as safe, and under government plans those in buildings under 18m tall could have to take out loans of up to £600 a year to cover repair work.

Building owners, leaseholders and politicians have complained that a significant portion of the cash put aside by ministers for repairs will ultimately end up back with the Treasury as VAT.

The current VAT rate on most remediation work is 20 per cent and campaigners are urging the government to scrap the charge.

“The cladding crisis has been going on for more than three years now and means tens of thousands of people across the country can’t get on with their lives,” said Stephen McPartland, a Conservative MP who has pushed for leaseholders to be exempted from remediation work bills.

“It is very much within the gift of the government and the Treasury to make these works exempt from the 20 per cent levy and it would allow the government’s own £5bn remediation funding to go a lot further,” he added.

The Ministry of Housing, Communities and Local Government said: “Building safety is the responsibility of the building owner and we expect social landlords to balance their existing budgets to support the upkeep of their stock.

“In cases where remediation is not happening quickly enough, we’ve provided funding to ensure costs are not passed on to leaseholders.”