They were supposed to be bright, attractive to live in – and, above all, cheap.

But a development of “flat-pack” homes in Milton Keynes, designed by Lord Rogers and hailed by John Prescott as the future of affordable housing, have been put on the market by their developers at up to five times the original £60,000 construction cost.

The developers, George Wimpey Homes, argue that the high value of land in the area meant they could not realistically be sold for less.

The scheme launched by Prescott more than two years ago when he was deputy prime minister may now look like a naive attempt to buck the booming property market.

But it also illustrates the difficulties Gordon Brown will face as he tries to solve what the government believes is a chronic shortage of affordable housing.

Last week, in his “pre-Queen’s speech”, Brown announced plans to raise housebuilding to 80,000 a year to “put affordable housing within the reach of not just the few but the many”.

At a Labour policy meeting yesterday, Brown indicated that councils would be given new powers to deal with shortages of both rented and owner-occupied homes in their areas. He said Yvette Cooper, the housing minister, would announce further details over the next few days.

But if houses are to be made cheaper, more land will have to be built on, increasing the pressure to concrete over green belt and rural land. This, in turn, could cost Labour votes in key seats in southern England and the Midlands.

To minimise pressure on greenfield sites, Brown has ordered a shakeout of the public sector property portfolio, with the Ministry of Defence, the NHS and local authorities all ordered to release redundant sites for housing.

The “affordable” development on the outskirts of Milton Keynes sprang out of a competition launched by Prescott in April 2005. He invited architects and developers to produce designs for houses that would cost just £60,000 in materials and builders’ fees to construct.

Lord Rogers, architect of the Pompidou Centre in Paris and the Millennium Dome in London, was one of the winning designers. He envisaged houses built from prefabricated flat-packs. Their clip-together parts resemble giant grey, cream, black and dark red Lego pieces and they are topped with “eco hats”, glass chimneys that light the houses and provide ventilation.

The homes were never meant to sell for as little as £60,000, but the soaring costs of both houses and land have put them out of the reach of the home-buyers at the bottom of the housing ladder they were intended to help.

Four-bedroom units are being sold by George Wimpey Homes for £295,995. Even a two-bed-room home on the estate at Oxley Park costs £185,000.

The prices are virtually identical to those for similar-sized properties on a neighbouring estate built by Barratt using more traditional techniques. “[Prescott’s scheme] was intended to show you could build nicely designed houses quickly and cheaply,” said a spokeswoman for the Department of Communities and Local Government. “But the cost of land is proving to be a huge issue which is exactly why we are now talking about using the surplus sites from the Ministry of Defence, the NHS and in council ownership to reduce the costs of housing.”

No part of the country has missed out on the house price increase, but the problem of affordability is worst in the southeast where the supply of land is also the tightest.

Government figures show that even the cheapest homes in the region cost almost nine times national average earnings, compared with six times in 2000.

To tackle the problem, the Brown government is planning to expand to around 100,000 a year the number of new homes built in the social housing sector – those available for rent from councils and housing associations or for partial ownership.

Six redundant Ministry of Defence sites will be taken over by the New Homes Agency, Brown’s new housebuilding quango, to build 7,000 homes.

Another 550 redundant brownfield sites – with owners such as the Department for Transport and the NHS – will be used to build 100,000 homes and 60,000 homes will be built on local authority sites.

But with 223,000 new households created last year and just 160,000 new homes built, young people in particular are struggling to find cheap houses to buy. Taro Russell, 31, and his wife Christine, 29, have been forced to rent a flat because they could not afford to buy the house they wanted in time for the birth of their first child, in September.

“We are banking on what the government does,” said Russell, a television promotions maker. “We need some kind of new scheme to help first-time buyers. We looked into shared ownership, but found that most of the properties are flats, not appropriate for families with prams.”

The couple, who live in west London, could afford the interest payments on a £220,000 mortgage, but finding the deposit on the small two-bedroom house they wanted was beyond them.

“Our main problem was the deposit as we don’t have rich parents to help us and I don’t know anyone who has bought a house who hasn’t been helped out by their parents,” said Russell.

There were warnings this weekend that, although a step in the right direction, the government’s targets may not be enough to make housing more affordable.

“If met, we believe it would represent real movement towards stabilising affordability over the next decade,” said Professor Stephen Nickell, a former member of the Bank of England’s monetary policy committee. He is chairman of the National Housing and Planning Advice Unit, the independent body set up by the government to advise on the problem of affordability and housing shortages.

Nickell warned that it was not enough just to build affordable homes for first-time buyers. Logjams would build up in the market unless new houses of all types – including five and six-bedroom “executive” homes – were also built.

He also cited a report by Kate Barker, his former Bank of England colleague, that said additional building on this scale would have to mean encroaching on the green belt, which Brown ruled out last week.

Meanwhile, Price Waterhouse Coopers has calculated that even if Brown’s new targets are achieved and the number of new houses rises by 3m, the number of additional households will still increase by 3.2m.

The government is planning five eco-towns with zero or low-carbon housing. The first is likely to be built at Oakington Barracks, a former MoD site north of Cambridge. Brown has adopted the 10,000 home development that has been in planning for 10 years and is being designed by Arup, the engineering consultancy behind Dongtan in China, the world’s first zero-carbon city in China.

The government has appointed David Lock, the planner behind the development of Milton Keynes in the 1970s, to oversee the plans, which he said are inspired by recent experiments in sustainable living in Germany, the Netherlands and Sweden.

“We have a great deal of enthusiasm for prefabrication and modern methods of construction,” said Lock. “We want to use glass and steel and find a new English architecture.”

He said the government would be announcing guaranteed funding for schools, hospitals and roads in the new eco-towns. The towns, each of which will take 20 years to complete, will have about 10,000 homes and 25,000 residents.

The Prince of Wales is championing an alternative approach to providing extra housing, while minimising environmental damage. On Friday advisers will meet at Highgrove, his estate in Gloucestershire, to draw up plans for a network of new towns built to design codes and architectural patterns pioneered at Poundbury, his neo-Georgian village in Dorset.

At the seminar, organised by the Prince’s Foundation for Architecture and Urbanism, Savills, the property agents, will present research arguing towns and villages built to traditional plans will be more profitable for developers in the long term than conventional housing estates.