The government had its first major legislative defeat since taking power as the Senate crossbench dashed hopes of passing a $10 billion affordable housing fund in time for the budget.

The Greens and Labor claimed a victory on Monday after a policy to make big polluters cut their emissions was agreed too, while another deal helped a multibillion dollar manufacturing fund pass.

But Labor’s hopes of securing support for the third big plank of its election platform, the housing fund were dashed much before negotiations might have usually entered a critical phase.

The crossbench has terminated these discussions by even refusing to debate the bill – with an abruptness that can only mean they want a public fight on housing affordability – and hopefully a much bigger response.

Tweet from @DavidPocock

On the table is a Labor plan to build 30,000 new social and affordable homes in five years.

That outlay will be financed by hundreds of millions of dollars coming from the nation’s future fund. The government says it’s a self-sustaining funding source for new housing at a time when state government housing stock is disappearing as buildings decay.

Many on the crossbench and civil society groups say the housing policy on offer does not come close to answering Australia’s biggest need.

They underscored just how far off they thought it was on Tuesday afternoon.

‘Doesn’t guarantee more housing’

Senator Sarah Hanson-Young, who is deeply involved in the Greens negotiations on climate but also housing, put paid to any hope the government would have of securing an agreement on housing in the final week before the budget.

“The housing bill won’t be dealt with,” said Senator Hanson-Young.

“They don’t have the numbers. The big problem with it is it doesn’t guarantee more housing.

“We also know a third of Australians (renters) are getting screwed.”

It’s a crushing blow to a key pillar of the government’s platform, which it had hoped to legislate in time for the federal budget in May, alongside two other key bills.

One observer in Labor speculated that a political campaign on housing may have been the price of the Greens’ agreement on climate policy and the safeguard mechanism.

But if the crossbench is playing politics on housing policy going public with their concerns might change the negotiation in their favour, given the breadth of concern about rising house prices, not only recently.

One Independent Senator opposed, David Pocock, seems to be signalling a intention to make fair social policy the main issue he wants to promote as a joint-holder of the balance of power.

Instead of infrastructure boondoggles or religious edicts he made the price of his vote for an IR Bill a new economic inclusion committee that must provide advice about the standard of living of people on support payments – a constituency not over represented among Canberrans who voted for him.

(Though a non-starter in this Parliament it’s an idea it’s an idea with wide support, Nearly 40 per cent of Australians believe unemployment benefits should be raised, up from half that a decade ago).

Housing is part of the same picture for Mr Pocock who complains of a 3000-person housing waiting list in the ACT while 10 years seems optimistic in most states.

For Mr Pocock  the housing fund is not anywhere near big enough given its importance of an affordable housing shortage to many Australians and last week said the fund should start at no less than $20 biillion (echoing the policy experts).

“We need the government to make a better start than this when we are talking about one of the biggest crisis facing our communities,” he said.

Call for greater action

Housing Minister Julie Collins says the government has an additional piece of policy with the states to cater specifically for one crossbench demand: new homes for renters. An agreement, she says, has the states and federal government build a total of 20,000 homes each year..

“We are talking to them about getting this fund up and running because vulnerable people need it.

“Organisations that represent workers who are dealing with vulnerable people day in, day out, say that these bills are urgent.”

At a rally on Tuesday outside Parliament the Greens and crossbenchers called for greater action in the form of a $5 billion yearly commitment to building affordable housing and a national freeze on rents.

Speakers at the rally including members of the CFMEU who said the Future Fund, or the national sovereign investment fund chaired by Peter Costello, does not always generate positive returns and could put housing investment at risk.

“This could be a vote winner for them and it could transform the lives of people who are doing it tough,” said Greens MP Max Chandler-Mather.

CFMEU spokesman Zach Smith said the government needed to spend at least $290 billion over the next two decades on housing, or risk the crisis continuing.

“What $290 billion represents is 700,000 houses that are needed for our most vulnerable in society,” he said.