Rishi Sunak has been branded weak by Labour after bowing to pressure from rebel backbenchers over housebuilding targets in a move described as a “unconscionable” by the shadow levelling up secretary, Lisa Nandy.

Campaigners fear that housing secretary Michael Gove’s decision to scrap mandatory targets for local councils in rural and suburban areas puts at risk the government’s manifesto pledge to build 300,000 new homes a year.

Gove has watered down the government’s target to build 300,000 homes every year following a furious backlash from his own party’s MPs.

A Commons vote on the Levelling Up and Regeneration Bill had to be dropped last month after 60 Conservatives signed an amendment calling for the mandatory target to be abolished.

But the legislation is due to return next week, and opposition is said to be growing, so the housing secretary has now written to a number of MPs promising the target will instead be a “starting point” and become “advisory”.

In a statement, the Department for Levelling Up, Housing and Communities said targets “remain an important part of the planning system”, but the government would now “consult on how these can better take account of local density”.

There is growing concern among some that the dampening of the housebuilding target will lead to even less stock for estate agents and ultimately people looking to buy property, adding to the supply-demand imbalance in the market.

Industry reaction:

The MD of Stripe Property Group, James Forrester, commented: “This is astonishingly negligent on the part of the government. House building has languished below the required 300,000 annual number since the 1950’s and that’s even with the focus and accountability of local authority facing targets. To remove those targets is to allow the UK’s requirement to dangle in the wind and we now have even less chance as a nation of providing adequate dwelling numbers. It’s a dumb move”.

The CEO of Alliance, the Real Estate Fund, Iain Crawford, said: “Another day, another u-turn but this one is particularly serious in that in watering down the country’s likely annual residential construction output, thousands of would-be buyers and renters are going to have less choice of home. The result will be even higher house prices as increasing demand from net positive immigration and an aging population continues to outweigh supply.”

Lee Martin, head of UK for Unlatch, added: “Removing accountability for building at local authority level seems somewhat counterintuitive to the problem at hand. Just as the country is slowly getting to grips with higher housebuilding volume and recent completions were starting to look meaningful versus need, the Secretary of State jams that momentum into reverse and effectively kills all possibility of reaching the very levels of supply that the government itself has aimed for but missed for years. It’s hardly progress.”