The boss of a charity which supports ex-service personnel said he was “gutted” plans for a veterans’ village near Hull were shelved.
The development in Cottingham aimed to help veterans transition to civilian life.
But spiralling costs and high demand for other services meant the project was no longer viable, chief executive Paul Matson said.
Mr Matson, a veteran himself, said: “It would be very difficult to raise that amount of money to kickstart the veterans’ village, and be safe in the knowledge that we would complete.”
The idea of creating a community for veterans leaving the armed forces, along with training and support facilities, was granted planning permission in 2020, with an estimated development cost of £8m.
However, a review by charity trustees in June found the project now had an estimated cost of between £17m and £20m.
The review also cited changes in “operational priorities” as demand increased for other services provided by the charity.
Mr Matson said: “At the time [the idea was conceived] we felt it was very needed to help prevent the kind of things we were seeing – people who had left the forces who were struggling and couldn’t quite find their way in life.”
However, Mr Matson said the charity was now seeing a lot more people coming for help.
“We really need to concentrate on what’s here and now,” Mr Matson added.
The charity has to date helped about 5,000 veterans, and supported 25 people out of homelessness this year, according to Mr Matson.
It was currently renovating a house to provide temporary accommodation for homeless veterans.
Anyone who had donated funds for the veterans’ village could have their money returned, donated to another cause, or directed to fund other services at Hull4Heroes, Mr Matson added.
People attending the Beverley Armed Forces Day on Sunday voiced their support for project.
“It [the veterans’ village] should be fought for,” one woman said.
Another person said: “People expected it to come to fruition – it’s very sad – these people need help.”
One ex-serviceman added: “There are some people who need a lot of help and they can’t get it living in [the community], but in a village like that they’ve got help all the time.”