Ministers have dropped plans to relax affordable housing rules for developers in England after a backlash from housing experts who warned it could drastically cut the number of cheaper homes available in rural areas.

The government said on Monday it would not go ahead with proposals to end affordable housing quotas for private builders on sites containing between 10 and 49 houses after a consultation triggered an overwhelmingly negative response.

The change, which was included in the government’s 150-page planning reform document (pdf) on Monday, is one of the most significant reversals ministers have made to housing policy since Andy Burnham became prime minister.

Kate Henderson, the chief executive of the National Housing Federation (NHF), said: “It’s extremely positive to see that the government has listened to the social housing sector and decided against removing onsite affordable housing requirements on medium-sized development sites.

“This decision will safeguard one of the most important routes for delivering social homes in rural areas, ensuring we can build genuinely affordable homes where people need them, in every postcode across the country.”

Under the original proposals, ministers would have allowed developers to make cash payments instead of building affordable housing on-site if their developments were between 10 and 49 houses.

Ministers hoped the measures might help to boost sluggish rates of housebuilding and bring the government closer to its target of building 1.5m new homes by the end of this parliament. The Treasury under Rachel Reeves is understood to have been particularly keen on the idea.

Housing experts, however, warned that such a rule change would have a major impact, especially in rural areas where a significant number of affordable homes are built on medium sites rather than larger ones.

An analysis of government statistics by the NHF, revealed by the Guardian, showed that in the most rural areas of England, more than half of all affordable homes are built on developments of this size.

The organisation said the policy change could cost the country 32,000 affordable homes over the next 10 years.

The government document reveals that of the 910 people and groups who responded to the consultation, 41% were strongly opposed to the measure, compared with just 18% who were strongly in favour.

The document said: “There was significant opposition across stakeholder groups.”

It added: “The government has considered these responses and has decided not to proceed with proposals to allow applicants discretion to deliver social and affordable housing requirements via cash payments in lieu of on-site delivery on medium sites.

“This reflects concerns that, at this time, it could have a detrimental impact on the manifesto commitment to deliver the biggest increase in social and affordable housebuilding in a generation and to strengthen planning obligations to ensure new developments provide more affordable homes.”

Ministers are keen to relax regulations for private sector builders in other ways. Moves announced on Monday included instructing councils to give a “default yes” approach to housing developments that are within a reasonable walking distance of well-connected train and tram stations.

Angela Rayner, the housing secretary, said on Monday: “I’m very clear that we need these homes. We have already seen nearly 400,000 since we came into office, new homes that have completed. We’ve seen a 15% increase in start-ups for housing starts.

“We want to continue on that path and that’s why we’ve set out these rules to make sure that we can get planning through as quickly as possible, and we can get the infrastructure alongside the housing that we desperately need.”