Surplus public land will be developed to provide young people with up to 10,000 affordable homes from as little as £60,000.
First time housebuyers in London could save up to £100,000 on the cost of their homes under plans unveiled by deputy prime minister John Prescott.
The saving could be made by the government buying land to be set aside for building new and affordable homes.
Buyers starting out on the property ladder would pay the cost of building the property but not the full cost of the land.
Prescott said it should be possible to buy a new home for £60,000- £100,000 less than the average cost of a property for a first time buyer. The state owned land will be bought from local authorities, public agencies and government departments and kept in trust. It would then be leased to developers.
Prescott said: "The new scheme will put surplus public land to better use to create homes for first-time buyers. The Government will own the land but we won't sell it off- we will keep it in trust and lease it for new housing in mixed-tenure communities."