Councils have been forced to pay more than £800 million from Right to Buy sales to the Treasury over the past five years.
The money could have been used to build over 12,000 additional council properties – almost double the number actually built since 2012.
The government said that the money had been used to help pay the deficit.
Housing minister Gavin Barwell said the practice of seizing the local authority funds was “part of addressing the deficit in the nation’s finances.”
Labour has called the revelations “shameful”.
Despite the government promising one-for-one replacement of council homes sold under right-to-buy, official figures show that only one in six has actually been replaced, with only 6,560 council homes built since 2012.
Right to Buy was introduced by the Conservative government in the 1980s to give council house tenants the opportunity to purchase their homes at a discount.
One of the flagship policies of the Thatcher era, it was seen as a way of giving aspirational working class council tenants the chance to get a foot on the housing ladder and improve social mobility.
John Healey, the shadow housing secretary, said: “It is shameful that hundreds of millions of pounds raised from the sale of council properties has been seized by Conservative ministers, rather than being used to build new homes.
“Under plans set out by Labour, local councils bought out their housing debt from central government in 2012, so this is an indefensible cash grab by the Chancellor.
“He is robbing councils of their own cash and stopping them from building the new homes needed.
“Affordable housebuilding is at a 24 year low. After seven years of failure on housing this is yet another example of a government that has no plan to build the homes we need.”
The government recently confirmed plans to extend the Right to Buy scheme to housing association tenants.
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