Treasury considers threefold proposal to boost supply, including public funding of site infrastructure

The Treasury is considering including a three-fold plan to boost housing supply worked up by the communities department and Homes and Communities Agency in next month’s Budget.

The measures, which would use public and private funding, are designed to turn around the huge decline in housing starts in the past 18 months, currently 60% down on a year ago.

The first part of the plan, senior sources say, is for the government to fund site infrastructure such as access roads, utilities and street lighting in situations where the costs of these are making housing schemes unviable. The HCA, which would administer the fund, would receive an equity share in the schemes and a share in future profits.

It is not known how much government investment the HCA is asking for. The agency has £17.4bn of its own to spend by 2011, but is restricted over what it can spend this on.

The second part of the plan involves getting private investors to fund new-build homes for rent on the private market.

The third part involves expanding the HomeBuy Direct initiative (see below), in which the government and housebuilders jointly take a 30% equity stake in a new home to subsidise the price for homebuyers. Unlike the first round of HomeBuy Direct this would be aimed at kick-starting new developments rather than helping to sell finished schemes.

It is understood the proposal was put together after the HCA realised that its earlier plans to buy large stakes in stalled sites were unrealistic because housebuilders were unwilling to sell land at the current market rate. A source close to the situation said: “Housebuilders are not interested – the last thing their banks want them to do is crystallise the value at such a low point.”

The Treasury, the communities department and the HCA declined to comment.