Plans to replace the communal area at Audlem's Thornton House complex may have to be mothballed.
Wulvern Housing Association says it is now no longer able to borrow enough of the cash it needs to help fund the project.
Audlem Parish Council was told that the working party set up to oversee the scheme was "very disappointed" at the setback.
But Roger Millns of Audlem & District Community Action (ADCA) told councillors: "It is not all bad news. We are still confident we can achieve our objective in the next few years."
Wulvern Housing held a consultation meeting only last month over plans to replace Thornton House in Cheshire Street with a modern supported social housing complex by 2015.
Plans are in place to build eight bungalows on the site by 2015. Talks were taking place on incorporating a new communal lounge and kitchen into the scheme.
Various funding options were being pursued and ADCA were working with Wulvern, Cheshire East Council and the Parish Council to put together the necessary capital to build the community facility and to ensure that the running costs could be covered.
But cash has been difficult to find and the current financial climate has taken its toll. Tightening of finances has also meant that Cheshire East now "regrets it is unable to proceed" with the current scheme, parish councillors were told.
Roger Millns said an option was still open to take out a long-term lease on the land at a peppercorn rent to pave the way to build a community room on the site.
"We would then be under no pressure to build and there will be some scope for further discussions on financing the project," he said.
Councillor David Higham commented: "We have done a lot of work on this over a long period and we are very disappointed that this scheme is not now deliverable."
Plans are still in place to build eight new bungalows on the site. Current residents will be relocated to suitable alternative accommodation and given priority to return when the new bungalows are completed in 2015.
Only last week, Crewe-based housing provider Wulvern opened a £1.8 million development on Wellington Road in Nantwich that includes 14 low rent apartments with underground parking.
Wulvern has also been short-listed from almost 300 entries to the 2013 Housing Heroes Awards organised by Inside Housing magazine and the Chartered Institute of Housing.
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