Highland said housing associations covered more of the building costs
A council said it wants to build houses again, but could not afford to take part in a government scheme aimed at encouraging authorities to do so.
Highland Council said it did not make "financial sense" until it reduced its high loan debt.
It said the Scottish Government subsidy available would, "at best", cover about 20% of supplying new council houses.
However, the equivalent housing association grant subsidy would be nearer 70%.
Margaret Davidson, Highland's housing and social work chairwoman, said the council would assure the Scottish Government it was committed - and has real enthusiasm - to increasing housing supply.
She said: "It's a real disappointment that we are unable to undertake new council house building in the Highlands at this time. The sums do not add up.
"We know that our communities and tenants want us to build council houses again.
"Unfortunately, given the other issues we face in terms of housing debt, we simply cannot construct a workable business case on the current subsidy levels involved."
On Wednesday, council house rents in the Highlands were to increase by an average of £2.46-a-week.
Highland Council said the raise was needed to help meet the cost of a £13.2m upgrade of local authority housing in 2009/10.
The council said about £88m would need to be spent over the next six years to bring its stock up to national standards.
The work would include installing new kitchens and energy saving materials.