Public sector to take on social housing developments

The government is planning a big expansion of public sector housebuilding in order to respond to the credit crunch.

Steve Douglas, the chief executive of the Housing Corporation, said a range of actions were being considered to ensure that social housing targets were hit, including letting the public sector take the lead in large housing development.

Douglas' comments follow housing minister Caroline Flint's speech to the Chartered Institute of Housing's annual conference in Harrogate. In it, she said she had asked officials to consider urgent action to address the credit crunch.

Douglas said: "The private sector delivers the goods in a rising market, but in a downturn the private sector is not enough. What we're looking at now is a public-led building programme."

Asked if it could mean public bodies directly employing contractors, Douglas said: "Potentially, yes."

He added the exact nature of public sector partnerships, involving councils, housing associations and government agencies, would depend on the specific situation.

Douglas added that the Housing Corporation was willing to support land purchases from housebuilders if a sufficient discount could be negotiated.

The corporation has been asked to produce 180,000 affordable homes in the next three years with £8.4bn in grants.

Douglas said the credit crunch options included:

• Encouraging housing associations to develop homes for 'rent-now, buy-later' schemes
• Expand new partnership arrangements such as asset-backed vehicles or Local Housing Companies
• Giving the public sector the lead in development.

Abigail Davies, head of policy at the CIH, said: "The government is right to try and use those organisations in a good financial position to get us over the hump of the problem."

The government last month announced a £200m plan to help private housebuilders burdened by unsold units.