EFFORTS to tackle the shortage of affordable homes in York, North Yorkshire and the East Riding have been dealt a hammer blow by John Prescott.

The Deputy Prime Minister said no parts of the area would be included in a scheme to limit abuse of the "right to buy" council houses.

Campaigners in the city had pinned their hopes on a Government pledge to review the system, which allows council tenants to buy their houses at a knock-down rate.

Mr Prescott announced a review amid evidence that council tenants in property hotspots have been purchasing their homes cheaply, then sub-letting them for an increased rent.

Property developers have also been contacting council tenants and urging them to exercise their right-to-buy.

They then offer to pay the tenant substantially more money to sell the property on, before putting it on the market themselves for an even higher price.

This has led to a reduction in the amount of social housing which is available for low-income families.

Yesterday Mr Prescott concluded that measures were needed to address the issue in 42 property hotspots, slashing the maximum discount from £38,000 to £16,000.

But he did not include City of York or any parts of North Yorkshire or the East Riding on the list - which is dominated by local authority areas in London.

Speculation at Whitehall is that Mr Prescott wanted to impose the restrictions over a far greater area, but was blocked by the Treasury.

According to reports, Chancellor Gordon Brown was worried about the loss of revenue from council house sales.

A recent Housing Needs survey produced by City of York Council revealed the desperate shortage of affordable homes.

A total of 954 new affordable homes are needed per year for the next five years. However, only about 700 new homes are being built in total in the city every year and less than 200 are classed as affordable.

Updated: 11:32 Thursday, January 23, 2003