The housing-market collapse has made the project non-viable for business, The Guardian reported.

Government officials acknowledge they are poised to launch a rescue package, the newspaper said.

"The Olympic Delivery Authority is doing all it can in difficult circumstances, but the property crunch and the credit crunch means we are looking at a funding gap of around 250 million pounds for the athletes' village at the moment," a senior government official told the newspaper.

The private sector was originally going to build more than 3,000 apartments for competitors on the Olympic campus in a $1.77 billion project.

The money will come from $16.5 billion in public funding set aside to stage the games, the newspaper said.

Britain's Treasury is understood to want most of the $442 million to be found through cuts, the Guardian said.

Architects have already been ordered to cut the number of apartments in the village by almost 1,000, which means five athletes, rather than four, will share an apartment during the games.

A number of high-rise blocks in the village have been scrapped, the newspaper said.