Enfield council in north London has withdrawn from the government’s new towns programme, in a significant blow to Labour’s flagship housebuilding scheme.

The move by the new minority Conservative-led administration could present one of the first tests of Rachel Reeves’s planning changes, designed to curb the use of judicial reviews against new infrastructure.

The project to build 21,000 homes at Crews Hill and Chase Park on the northern fringes of the capital was selected in March for the new towns programme along with six other locations across England.

The new towns scheme has been heralded by the Ministry of Housing, Communities and Local Government (MHCLG) as the most ambitious housebuilding project in England for half a century and is regarded as a significant step towards helping Labour achieve its goal of building 1.5m homes during this parliament.

The withdrawal comes after significant local opposition to the Enfield plan to build homes, shops, schools and services such as doctors’ surgeries on green belt land currently occupied by several garden centres and family-run businesses.

Enfield council, which was previously run by Labour, had already devised a plan to build homes at Crews Hill and gave its backing to the new town proposal.

However, Labour lost control of the council in the local elections earlier this month and on Wednesday evening the Conservative councillor Alessandro Georgiou was elected leader of the authority’s minority Tory administration.

The Conservatives promised during the election campaign to halt the new town development if they took control of the council.

On Thursday, Georgiou sent a letter to the minister for housing and planning, Matthew Pennycook, informing him that the council no longer supported the proposals to develop land at Crews Hill and other parts of the borough’s green belt.

In his letter to the MHCLG, Georgiou said the council would work with the government to deliver new homes and jobs in the borough, but would focus on brownfield sites and town centre regeneration.

Georgiou said: “We have been elected on a clear mandate to protect Enfield’s green belt, and today we are honouring that commitment by formally withdrawing from the new town process.

“This does not mean stepping back from the challenge of delivering homes and jobs. We are committed to working with government to meet housing need, but in a way that protects our precious green spaces.”

Enfield council owns just under a third (30%) of the land in the borough, while other land earmarked for the development belongs to private landowners.

Most of the private landowners did not want to sell, according to Nina Barnes, who owns the Culver garden centre site at Crews Hill, close to the centre of the proposed new town development.

Barnes said she welcomed the move by the council with a “great sense of relief”. She said it had ended uncertainty for her and the businesses operating on her site, that had feared having to close down and move elsewhere to make way for the development.

Describing the new town plans as “ludicrous and ill-thought-out”, Barnes said she was not against building new homes but that they had to be “in the right areas that could sustain [them] with infrastructure”.

“With the weight of destruction lifted, we can now fully invest in new projects to improve an already thriving area,” she said.

An MHCLG spokesperson said: “Our landmark national new towns programme will restore the dream of home ownership for people across the country.

“We recently consulted with local people on the proposals and will respond in due course.”