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In the run-up to last month's urban summit, they point out, the deputy prime minister turned down three schemes, totalling 1274 new homes, because they failed to meet the exacting standards of PPG3 planning guidance, which demands high-density use of brownfield sites and an affordable housing element on private developments.

"Prescott is shedding crocodile tears about a housing shortage that is the result of his own policies and decisions," says former House Builders' Federation chief executive Roger Humber. "Government policies – in particular PPG3 – and the overzealous application of the increasingly complex policies that flow from it, leading to appeal refusals, are responsible for the acute shortage of new homes."

PPG3 has stirred up a lot of controversy since it was introduced in 1999. The then-housing minister Nick Raynsford declared war on car-dependent greenfield housing developments. Instead, PPG3 encouraged high-density, well-designed housing on brownfield sites.

However, housebuilders are complaining that even when they propose PPG3-friendly schemes, Prescott finds a way of scuppering them.

He rejected Wimpey Homes' 166-home Marston Green development in Solihull just days before the urban summit. Wimpey fell foul of a clause in PPG3 that says councils have to take out a housing capacity survey to assess the level of affordable housing needed in an area. In Wimpey's case, the survey suggested that 25% of such housing was necessary on new developments, but the scheme provided none.

Not that it was Wimpey's fault. The council had told the housebuilder that the scheme would not need to include any social housing. Prescott disagreed. His judgment was: "The need for affordable housing in Solihull is such that each strategic site coming forward should make an appropriate contribution."

Wimpey casts itself as the victim in what appears to be a power battle between Prescott and the council. Bruce Malin, development director of Wimpey Homes' West Midlands office, said: "The only reason we felt that the scheme went to planning inquiry was to be used as a guinea pig for the housing capacity survey."

Prescott seems to have won the battle. Wimpey Homes has just submitted a second detailed planning application with a 25% social housing element. Malin hints that the conflict over the affordable housing provision has done little except delay the construction of new housing. "It is fundamentally the same scheme. It's just one of those things you have to live with these days."

Prescott also rejected Enodis Developments' plan to build 820 homes in the Uttesford area of Felsted, Essex. Originally, the developer was only going to build 655 homes, but decided to up this figure to increase the density of the scheme to 31 dwellings per hectare. Given Prescott's threat to kibosh any proposals of fewer than 30 dwellings per hectare in the South-east, he could reasonably have been expected to give this scheme the green light.

The housing inspector certainly thought so, and recommended approval.

But there was a catch. The increase did not include any new affordable housing provision, meaning that the overall scheme would only be made up of 17.2% of such homes. Prescott ruled against it: "The secretary of state does not think that the improved density under the proposed scheme would be enough to outweigh the low contribution towards affordable housing."

A 288-home scheme by Laing Homes also fell foul of Prescott's exacting interpretation of PPG3. The development in Fareham passed the density test with flying colours – it had 36.5 homes per hectare, well above the minimum of 30. But the site was on greenfield land, so Prescott rejected it – despite the fact that the site was recommended for housing in the local council's plan.

Prescott is shedding crocodile tears about a housing shortage that is the result of his own policies and decisions

Roger Humber, former HBF chief executive

According to many in the industry, PPG3 itself is not the problem. John Assael of Assael Architects says: "PPG3 is excellent. I'd like to see local authorities adopting its recommendations more consistently." He likes the emphasis on brownfield development, high density, and – naturally, for an architect – high-quality design.

One measure that Assael approves of is PPG3's requirement that 60% of new homes are built on brownfield sites. Greenfield sites are only supposed to be used if appropriate brownfield land is not available. Assael says: "In Bristol they still have empty bomb sites from the Second World War. It's much better to build there than in the green fields between Bristol and Bath."

That sounds fine in theory. But the effect has been less development on greenfield sites without a corresponding increase on brownfield sites, according to Nigel Moor, an adviser to planning consultant RPS. He says there were 149,100 housing completions in 1997 – 67,600 on greenfield sites, 81,500 on brownfield. In 2001, the number dropped to 129,700 (the lowest since the 1920s) with 52,100 on greenfield sites and 77,600 on brownfield.

Moor concludes that the crackdown on greenfield development is contributing to the shortage of new homes. He says: "What the government hasn't appreciated is, '60% of what?' The implication seems to be that the housebuilding industry will carry on building no matter what. But this is part of a squeeze that will result in a shrinking housebuilding industry."

Density is another issue where PPG3 has ruffled feathers in the planning world, by requiring at least 30 homes per hectare in new schemes. One planning consultant said: "Prescott keeps wittering on about densities of 400 per hectare in Barcelona. I can understand the 30 units per hectare requirement for inner cities, but he's got a blanket policy across the country. It creates terrible burdens on transport and local facilities."

Nigel Moor has no objection to the high density requirement, and claims it encourages more imaginative designs than the standard layout of identikit four-bedroom houses. But he points out that many local authorities resent having high density dictated to them by central government, and routinely refuse them planning permission, leaving the developer to fight a costly appeal before the scheme can go ahead. He says: "There is a perception that high-density schemes will automatically go to appeal. Some housebuilders will go ahead anyway, but others think it's not worth the candle."

In Barking – a key site in the huge Thames Gateway regeneration zone – a number of concerns over density have emerged. Councillors have voiced their constituents' dislike of densities topping 100 homes per hectare. Residents fear heavy building work on their doorstep.

PPG3 requires new developments to include an affordable housing element – either traditional social housing with subsidised rents, or new arrangements such as key worker accommodation. The policy has some high-profile supporters – London mayor Ken Livingstone wants 50% of new homes in the capital to be in the "affordable" category – but it has been widely criticised. A planning consultant said: "Housing developers are hit by a double whammy: they are forced to develop affordable housing and sell it at cost, and if it's used to house homeless people, that reduces the value of other homes on the development."

The lack of parking spaces on PPG3 sites causes big problems, according to Bovis Homes chief executive Malcolm Harris. He says: "Go and look at a high-density scheme this weekend. People park on the pavement outside their house – it's dangerous; emergency vehicles can't get access quickly enough." The restrictions on parking spaces are designed to encourage use of public transport. But Harris says that's inappropriate for the key workers such as nurses and firefighters for whom many new homes are intended. He says: "The average key worker works unsocial hours – you can't get the bus or the train to work if you work in shifts."

Brownfield development, affordable housing, high density, low parking levels – anyone wanting to build a new housing scheme has to jump through a lot of hoops. All schemes by specialist housebuilder McCarthy & Stone are high-density brownfield sites with no parking spaces. But they still fall foul of PPG3 because the company only builds retirement homes, so its schemes don't include affordable housing. Gary Day, the company's director of land and planning, says: "We meet all the sustainability criteria, but we don't get an easy ride in planning – it's frustrating."

Roger Humber delivers a scathing verdict on Prescott's recent decisions. He says: "This reflects the extent to which Prescott is applying the minutest aspects of PPG3 to a stupid extent.