Councils could deliver up to 500,000 new homes for low income families over the next decade if they are given new freedoms over their budgets, town hall leaders have said.

The Local Government Association (LGA), which represents more than 350 councils in England and Wales, said more than 450,000 new homes could be built by councils if restrictions on housing budgets and planning were lifted.

A five-point plan published calls for root and branch reform of the way social housing is funded to meet the burgeoning demand for homes.

Councils are eager to provide more homes for low income families. Government schemes to fund council house building have been significantly over-subscribed, while town halls have been pressing for urgent reform of council house funding which could fund hundreds of thousands of new homes in the next 10 years.

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Councils across Britain are currently building 4,000 homes under a £250 million programme announced in last year’s Budget. But they believe that there is huge scope for building affordable homes, redeveloping existing properties, refurbishing homes and using former industrial sites if councils are allowed to keep income for council house sales and are given full control over housing budgets.

Cllr Gary Porter, Chairman of the LGA Environment Board, said: "Councils up and down the country want to provide much-needed affordable homes for people and have been pressing for practical changes to the way things are run to let them do that.

"It is good news that the Government is consulting on far-reaching reforms of the way council housing is funded and we look forward to seeing their proposals soon. Town halls want nothing less than a renaissance in council house building to meet pent-up demand for homes that low income families desperately need.

"With house prices rising once more it is increasingly difficult for people with modest incomes to buy a home. Councils know this is a problem and have been campaigning for years to deliver homes for residents."

(CD/GK)