Before he was elected, David Cameron had Harold Macmillan’s picture on his desk to show he, too, was a one-nation, noblesse oblige, postwar consensus sort of politician – part of his “big society” disguise. But how misleading to choose Macmillan – who, appalled by what he’d seen of the great depression while MP for Stockton-on-Tees, built a record 350,000 council homes a year as prime minister.

Now Cameron has embarked on the abolition of social housing, both council- and housing association-owned. This isn’t an accident of the cuts, but a deliberate dismantling of another emblem of the 1945 welfare state. Instead of social housing for rent, the only money is for starter homes and shared ownership, out of reach of most average and below-average earners.

A third of the population can never own, without some radical redistribution of earnings and wealth currently flowing the other way. But plummeting home ownership is all that worries this government. Those who can never own will only have an unregulated private sector of rising rents, with housing benefit failing to keep up, and insecure six-month tenancies, where 1.5 million children are already at risk of regularly moving and shifting school. This is the end of a 70-year era of secure tenancies in social housing.

This makes political sense as part of Cameron and George Osborne’s still under-recognised attempt to reduce the state permanently to 35% of GDP, a level below anything resembling British and European standards for public services. As with tax credits, Osborne’s spending review cuts this month may prove politically impossible, but he will hope areas such as social housing are invisible, certainly to most Conservative voters. Osborne has purloined the word “affordable” to mean the opposite – an 80% of market rent that typical council renters can’t afford.

The housing and planning bill, now in the Commons, is designed to finish off social renting. It carries out the manifesto pledge of a right to buy housing association properties at heavy discounts. Local authorities have to sell their most valuable homes to pay towards that discount – so two social homes are lost for every one sold.

Council and housing association rents are cut by 1%, which sounds good but the Institute for Fiscal Studies says it helps very few of the 3.9 million social tenants: it just comes off their housing benefit. But it’s a bonus for the Treasury, taking £1.7bn off the housing benefit bill by leaving a disastrous hole in council and housing-association finances: they will build 14,000 fewer homes to rent. Borrowing to build will be harder, as this loss of rent caused Moody’s to downgrade housing associations’ credit ratings. The FT reports that, as a result of the rent cut, council plans to build 5,448 homes were cancelled instantly.

The only grants will be for starter homes for new buyers, not homes to rent: a starter home costs 80% of market value, out of reach of those on average income in over half of the UK according to Shelter, and way beyond below-average-income families. Of course there need to be homes to buy – but why at the expense of social rented homes? Here’s another hammer blow: section 106 of the 1990 Town and Country Planning Act requires developers to provide some social housing – a good source of homes to rent – but the new bill scraps it by letting developers build starter homes instead. Worse still, they can build smaller, lower-quality homes.

No surprise that this is a government for home buyers, not for renters. But where’s the protest from housing associations? Threatened with losing their independence, the larger ones agreed a “voluntary” deal to let all this happen. What an irony that last week the Office for National Statistics decreed they are now so firmly under the thumb of government setting their rules and rents that they have been redesignated as public bodies. At a stroke their £60bn of borrowing has been added to George Osborne’s national debt – so they sold their souls for an illusory independence.

In the Commons today, as the bill gets its first scrutiny in committee, several housing associations are summoned to give evidence – and some have a good deal of explaining to do. Founded as charities in Victorian times or in the Cathy Come Home 1960s, the largest appear to have lost all sense of their original purpose – to provide good, cheap rented housing. Some have morphed into property developers. Smaller ones stay close to their communities keeping their charitable flame alive, such as Hastoe, one of those giving evidence that refused to vote for the deal. It says only 20% of its tenants could ever afford even shared ownership, and what would become of the rest?

A third of housing associations plan to build no more affordable homes. Genesis, one of the largest, was founded in the 1960s as the benign Paddington Churches Housing Association, but has abandoned building for social rent. Its chief executive says housing those on low incomes “won’t be my problem”.

Genesis housing association will now only be building homes for sale, selling off any vacant properties

The highest paid chief executive, at Places for People, is paid £481,500, a growing trend among the big associations. Where is the charity commission, so eager to stop charities campaigning for good causes yet so lax at making housing associations obey the purposes set out by Octavia Hill, their movement’s great founder?

Housing Justice is a charity helping churches use spare land for social housing. It is outraged that land charitably donated is being taken by the government for forced sales, seeing its properties go the same way as the 2m council homes sold, where a third have fallen into the hands of high-charging private landlords.

Everything about housing finance is devilishly complex, so Osborne relies on few knowing the details. But Labour’s housing shadow, John Healey, says voters see the big picture: higher rents, higher deposits, housing benefit bill rising, fewer home owners, fewer homes built since the 1920s, and homelessness rising fast.

For every nine social homes sold off, only one has been built. “Get Britain building,” Cameron said, but few expect those million homes he promised. Housing is at the root of all good social policy. Good jobs, better education, decent communities, children at home in secure families – all depend on somewhere permanent and decent to live. Macmillan knew it, yet Cameron has abandoned it.

• This article was amended on 11 November 2015. An earlier version said Genesis would now only be building homes for sale, selling off any vacant properties. Genesis has said it will stop building homes for social rent and build only for affordable and market rents, shared ownership and sale. Vacant homes will be reviewed and may be sold.