Last week's Budget signalled a switch in the government's attitude to housing benefit.
The Budget report said the state would introduce a pilot to cut housing benefit costs by building social homes for rent, which would enable tenants to move out of more costly private housing. Treasury sources indicate that the homes will be developed by an arm's length management organisation.
Personal subsidy in the form of housing benefit has dwarfed the amounts invested in bricks and mortar. In 2005 it swallowed up £13bn of public spending, compared with £1.8bn of new-build subsidy to the Housing Corporation.
Jim Bennett, a senior research fellow at the Institute for Public Policy Research, said: "By linking increased social housing investment to reducing the size of the housing benefit bill the Budget signals an overdue rebalancing of capital and personal housing subsidies. This will be welcome news to the 1.5 million people on housing waiting lists."
Housing minister Yvette Cooper also announced £970m of support for shared ownership schemes. She is also setting up a taskforce to find ways for the private sector to provide more of this housing.