The National Federation of Builders has urged the prime minister to sanction the early release some of the Housing Corporation’s £8bn budget as part of a rescue package for the housing market.

In a letter to Gordon Brown, Julia Evans, chief executive of the NFB, proposes that associations could be given immediate access to grants from the 2008-11 budget when they have a specific offer of a scheme, rather than having to wait for the April start date.

The letter says: “This could substantially increase the supply of social housing in the short term and result in some sites that at present might not be viable for market development being built out. The benefits of guaranteed payments and cash flow in the market would encourage some developers to offer very competitive prices.”

Evans also calls on the government to send a circular to councils to stimulate the urgent release of land for family houses, which are still selling at “acceptable” levels.

The letter says many sites are allocated for high density flats, which are now uneconomic.

It adds: “Most sites with permission for flats will not be suitable for replanning for housing. There is therefore an urgent necessity to increase the supply of planning permissions for the kind of houses that we believe will sell in the present market.”

Roger Humber, spokesperson for NFB division the House Builders Association, said: “We need to see some urgent action.” He added that he had not yet received a response from the government.