Work on Northstowe near Cambridge, England, will not now begin next year and the first houses are unlikely to be built until at least the end of 2010.
It is a major blow to the government's plans for 10 ecotowns and shows that the global economic downturn is having a major impact on house building.
The body responsible for overseeing the building of the ecotown, the Northstowe delivery board, said that the decision has been taken because of 'unfavourable market conditions, the difficulty and cost of obtaining credit, and the complexity of the project' on the site of a disused airfield.
Northstowe's partners – English Partnerships, developer Gallagher, local councils South Cambridgeshire District Council and Cambridgeshire County Council, and housing growth delivery body Cambridgeshire Horizons – have agreed to work together to continue to progress plans, despite the challenging economic climate.
Cambridgeshire Horizons has also submitted a bid to the government for more cash to make the development of 10,000 homes more viable. Hundreds of millions of pounds of government money is needed.
'We hope that government can respond to our bids for additional pump-priming money for Northstowe, to enable this exciting development to move forward as quickly as possible,' said Alex Plant, chair of the Northstowe delivery board and chief executive of Cambridgeshire Horizons.
There is widespread speculation that the government is scaling down its formal eco-town process because of opposition to the developments and concerns that they cannot meet the environmental credentials that have been projected. It has had to launch a second round of consultations to try to win over public support.
One group of campaigners has already won a court case forcing a judicial review of plans to build an eco-town in Long Marsden near Stratford Upon Avon. They successfully argued that the development of 6,000 houses, leisure and retail facilities and a railway will fail in its eco agenda. Campaigners have also argued the development will spoil the area, which lies adjacent to the Cotswolds Area of Outstanding Natural Beauty.
