The government should encourage housebuilders to sell homes to housing associations by offering grants to bring them up to social housing standards, the Liberal Democrats have said

In a housing paper published yesterday the party also proposed an equal rate of VAT on new build and refurbishment. At present new-build homes are VAT-exempt whereas refurbishment work attracts a 17.5% rate. A policy adviser said a “small amount” of VAT should be charged on new build and a lower amount on refurbishment. The plans would not cost the taxpayer anything.

The party also proposed a £310m repair and refurbishment loan fund to help owners of empty homes and commercial property upgrade them for use as temporary social housing or short lets. Companies would be able to continue to claim business rate relief on empty properties put into the scheme.

Meanwhile, the Conservatives said they would temporarily relax space standards to allow housing associations to turn empty homes into social housing. They added that they would match the amount of council tax local authorities receive from each new home for six years to encourage new development.

The policy paper also said that £4bn of the £12bn which the Treasury has foregone by cutting VAT to 15% should have been spent on low carbon social housing.