Homes for vulnerable elderly people in Leeds have been dashed by government cuts.
Council bosses drew up proposals for the "extra care" homes - similar to sheltered housing but offering residents greater levels of support - and submitted a bid to the government to fund the scheme under the Private Finance Initiative (PFI) programme.
But with ministers looking for savings to tackle the nation's debts, the bid was rejected.
The homes would have been an addition to the 120 units of extra care housing due to become available over the next few months.
With the council looking to reduce the number of residential homes it operates because of falling demand, extra care housing and beds in private-sector residential homes will become increasingly important as alternatives.
Dennis Holmes, adult social care deputy director, told the council's adult social care scrutiny board: "We had hoped to construct 300 units of extra care housing under the PFI round six but that avenue is no longer open so we need to look at other routes for providing extra care housing."
Coun Ted Hanley (Lab, Bramley and Stanningley), board chairman,
said: "It is a great loss to elderly people and to expect the commercial market to fill that hole in the current economic climate is very optimistic indeed."
Coun Brian Cleasby (Lib Dem, Horsforth) said different routes to providing extra care properties had to be pursued and he suggested they could be provided in private development schemes.
He said: "Should there be extra care housing in developments such as that planned for Kirkstall Forge instead of just affordable homes?
"Adult social care should talk to the planning department about the possibility of developers providing extra care housing."
The councillors' comment came as consultation got underway into options for the future of council-run residential homes and day centres.
The council currently has 19 residential care homes and initial budget proposal suggest four could close in 2011-12 rising to 13 by 2012-15.