Plans to rebuild hundreds of homes riddled with concrete cancer in Bristol have been shelved.

The 549 homes affected are in Sea Mills, Henbury, Lockleaze and Lawrence Weston.

Known as pre-cast reinforced concrete (PRC) homes, they were considered too costly to repair and were scheduled for demolition and rebuilding.

However, the council did not have the money to pay for the project itself and so began looking for a developer to create a partnership deal.

The idea was for a developer to build 1,000 homes on council land – 300 of which would be taken back into council ownership and the rest would have been sold off privately.

But the tendering process has come to a halt because of the financial downturn.

Graham Sims, the council officer in charge of neighbourhoods, said: "This is not the news that many residents will want to hear after months of waiting.

"Unfortunately, the global recession, which has hit the UK housing and financial markets, has had an impact on the PRC project which could not have been predicted.

"We deeply regret the inconvenience caused to tenants and residents and our priority remains to come up with a solution as soon as possible."

Tenants affected received letters from the council yesterday.

Mr Sims said they expected to take up to 12 months to find a new solution.

Lib Dem Cabinet councillor Tim Kent, who is in charge of the council's housing department, said: "The situation is catastrophic for residents whose homes need repairs or even rebuilding.

"We will do everything we can to sort things out and find new solutions to the problems of people living in PRC homes.

"Residents will be properly consulted and we want to bring back on board those residents, such as some of those who live in Sea Mills, who have criticised or raised concerns about the proposed rebuilding scheme in the past.

"The council withdrew for a number of reasons, principally relating to financial issues affecting value for money and the achievement of the project's main goals. The social housing would have been paid for with the hand-over of council-owned land, the value of which has slumped in the recession.

"The economic downturn has also hit developers trying to fund schemes through the sale of private housing."

Mr Kent promised to consult with tenants and to come forward with new solutions as soon as possible.

He said these could include refurbishing or repairing houses previously earmarked for demolition. He said: "This is an opportunity for us to take a deep breath, consult with tenants and everyone concerned, so that we can come up with a speedy, workable solution as soon as possible."

The PRC homes were built mostly after World War II to ease a chronic housing shortage. They used a steel frame which was clad with reinforced concrete.

The big steel bolts which hold the frame together have been found to be rusting away – hence the name, concrete cancer.

A study in 2004 found that the estimated cost of rebuilding the PRCs would be £48 million while the cost of repairs would have been £32m.

The vast majority of PRC homes in the city – more than 2,000 – were considered to be fit for repair but some, known as the Parkinsons and the Woolaways, were judged to have inherent faults.

The tendering process did not lead to any preferred bidders being selected or any contracts being signed.

Mr Kent said that because the scheme had been stopped before that stage had been reached, there was time to re-evaluate and come up with new solutions.

He said one way forward would be to urge the Homes and Communities Agency (formerly Housing Corporation), a government quango which funds social housing, to change its rules so the council had more leeway in drawing up a new scheme.