Government quotas demanding 11,000 new homes on land around Leamington, Warwick and Kenilworth have been scrapped.
Communities secretary Eric Pickles this week wrote to local authorities telling them the new Government would abolish regional housebuilding targets.
These had led to land around Whitnash and Warwick Gates being earmarked for thousands of homes, w
ith 3,500 more on land near Finham as 'overspill' for Coventry.
The short letter effectively allows councils to ignore the targets, even before new laws are brought in.
Cllr John Hammon, who is responsible for development, said the council now faced new problems - including ensuring there was a policy in place when the current local development plan ended in September.
He said: "We're extremely relieved that we are not expected to completely ruin and overdevelop our area, because the infrastructure can't take it.
"Now we have to decide what we can do. We require somethig to keep our district in some sort of order."
Another challenge facing the council is building 4,000 affordable homes without contributions from developers, who would normally be expected to include a number of affordable homes in large developments.
The authority expects to have to build around 5,500 homes by 2026, around half the number previously demanded. Cllr Hammond said it would wait until it knew what the numbers were before it identified sites.
He anticipates a "stepped" building programme with a few houses per year, rather than large new developments such as Warwick Gates.
Warwick and Leamington MP Chris White (Con) said: "I'm pleased that within less than a month of taking office the new government has taken action to stop the centrally-driven development that threatened our area.
"This was a key part of our manifesto, and was one of my top local pledges at the election."
