The council secured planning permission to develop the mix of social and 'affordable' at Ravenswood in 2014.
However, the proposal was refused by Communities Minister Greg Clark this week as the mix of housing was unbalanced.
UCATT said the project would have been added to a development of over 1,000 existing homes, 25% of which are already social housing, and would've "reflected local housing needs and the surrounding housing mix".
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A report by a Government inspector added: "The overall design of the scheme is of a particularly high standard that would ensure the resultant dwellings would be sustainable and in keeping with the prevailing character of the surrounding area."
As a result, the decision has cost the council £4 million while 3,000 people remain on its housing waiting list.
Ron McKay UCATT's Eastern Regional Secretary, said: "Heartless, self-serving, hypocrisy. This is something we've come to expect from this Tory Government and this delivers it in spades. Those 3,000 people on the waiting list are left to whistle for a decent house.
"Not only are working people still without homes in Ipswich but the council has lost millions of pounds over what – even the Government's own inspector – calls an exemplary development."
(LM)
