A starter home scheme has been branded a "mirage" after research found houses will still be too expensive for most of the buyers it is aimed at.
Discounts of 20% will be available on 200,000 new homes in England but the move will fail to help first time buyers in the areas hit hardest by the housing crisis, according to the Local Government Association (LGA).
It calls for extra powers to allow councils to decide on the number, type and quality of starter homes neighbourhoods need.
Cllr Peter Box, LGA housing spokesman, said: "This new analysis shows that starter homes will be out of reach for the majority of people that are in need of an affordable home. Not everybody is ready to buy, and it is crucial that councils are still able to ensure there is a mix of homes that are affordable for those people that need them.
"In some places, such as the North-East and Midlands, the scheme will give people better chance to get on the housing ladder. However, a national scheme will not work for every area and fewer people will benefit from starter homes in areas where the housing crisis is most acute."
The cost of a discounted starter home will be out of reach for all people in need of affordable housing - those who would have to spend more than 30% of their household income on a mortgage - in 220 council boundaries and more than 90% in a further 80 areas, according to the analysis by estate agents Savills for the LGA.
An average earner with a 5% deposit looking to buy an average priced house would be able afford a starter home in just 45% all council areas in England with a 20% discount, the research found.
They would need a deposit of more than 20% to be able to buy in 85% of London boroughs, 49% of council areas in the South East and 40% in the South West with a fifth off the price.
Developers will face fewer obligations, such as requirements to pay for local infrastructure or provision of affordable rental homes, under the scheme.
Shadow housing minister John Healey said: "This new analysis confirms that starter homes are set to be a big let-down for those who need help buying a home.
"Home-ownership for young people on low and middle incomes is in free-fall yet David Cameron and George Osborne still think homes costing up to £450,000 are affordable for first time buyers."
Liberal Democrat leader Tim Farron said: "Starter homes may sound promising but this research shows we were vindicated in our criticism of the government's scheme. It will only make a dent in the housing crisis and we must do much more.
"This research shows that these starter homes are a mirage to millions. These, young, hard working and aspirational people deserve better than this. The dream of owning your own home is further away than ever."
A Department for Communities and Local Government spokesman said: "These assumptions are misleading as starter homes will be lower than the average house price for an area - and will be offered to young first-time buyers with at least a 20% discount.
"Latest figures show that the number of new homes are up by 25% and the Housing Bill will kick-start a national crusade to get one million homes built by 2020, including £8 billion to deliver over 400,000 affordable homes."