The Government has pulled the plug on funding for a £137 million Shropshire project to build hundreds of one and two-bedroom homes for older people and those with dementia.

Shirehall bosses are now looking at whether Shropshire Council can secure alternative funding to safeguard its Extra Care Housing scheme.

The council planned to fund the project through the Private Finance Initiative (PFI) system but the Homes and Communities Agency has announced that it will no longer support those schemes that are still in the “pipeline”.

Shropshire Council is one of 13 which has been cut off from this funding source.

The agency has said that it will work with authorities to “consider future options” but does not wish to raise any expectations of alternative funding being available.

Val Beint, director of community services at Shropshire Council, said today: “We are disappointed by the announcement, as a lot of work has gone into the development of the Extra Care homes scheme.

“However, we remain committed to finding ways of developing Extra Care Housing in Shropshire and are working with partners to explore other ways forward.”

The council wants to build 400 one and two-bedroom units for rent, mainly for older people who might need occasional help and support, and 24 respite units with facilities for dementia sufferers and their carers.

They would be located on a number of sites across the county, including Wem, Oswestry, Market Drayton, Shrewsbury, Baschurch and Highley.

Each development would also have community facilities.

There is said to be a strong need for such homes as Shropshire’s elderly population is growing at a much faster rate than regional and national level.

Figures that were presented to the council cabinet last March showed that the number of people aged 65 and over in its area rose from 46,200 to 57,300 between 1991 and 2007.

Council leader Keith Barrow, speaking at the time about the need for Extra Care Housing, said: “There are people looked after in their own homes, and there are those who are in residential care, but in the middle there is a void.”

The council has spent more than two years developing the project and initially looked at 25 potential sites across the county, before reducing them to eight.

By Dave Morris