Brown's social housing reform package welcomed by sector

The housing sector has welcomed plans unveiled by Gordon Brown to allow councils in England to give priority to local people when allocating social homes.

Greater flexibility in the operation of waiting lists is one of a set of measures designed to ease the shortage of affordable housing which has been blamed for fuelling resentment against migrants and driving up support for the British National Party.

Mr Brown also announced an additional £1.5 billion for house-building on top of the £600 million committed in the Budget in April, with the aim of financing a total of 110,000 energy-efficient affordable homes over the next two years. This should create around 45,000 jobs in construction and related industries, he said.

Communities and Local Government Secretary John Denham confirmed that the extra money for housing is not new cash, but will come from savings and efficiencies elsewhere in his department's work.

Mr Brown also announced a consultation on changes to the financing system to allow local authorities to retain all the money raised from council house sales and rent to help meet housing needs in their own community.

Details of the plans will be spelt out by local government minister John Healey when he announces the outcome of a review of council housing finance in a speech to the Local Government Association in Harrogate later today.

He said a new Housing Pledge will commit councils to giving tenants more choice of properties and to increasing the number of available homes by clamping down on those cheating the system - including people who sub-let social rented accommodation.

"Councils haven't built significant numbers of housing for a long time, but with this extra cash and an overhaul of the council house funding system I am giving councils the green light to start building more homes in their area," said Mr Healey.

He added: "When people see these new homes being built in their communities they need to believe that they, or people they know, have a fair shot at living in them. That's why I'm bringing in changes to the councils lettings system, to protect people's security as tenants but allow councils to give greater priority to local people and those who have spent a long time on a waiting list, as well as to give tenants more choice."

The chairman of the LGA's environment board Paul Bettison described the extra money for housing as "a major victory for town halls".

"Councils want to build homes to cut waiting lists and get people into their own homes," said Councillor Bettison.

"We have campaigned hard for town halls to keep control of proceeds from council house rents and sales that could deliver 300,000 new homes in the next decade. Allowing councils to spend the rent they collect and the proceeds from council house sales would be a huge boost to the economy."

Ruth Davison, director of the National Housing Federation, which represents housing associations, said: "The Government has at last recognised that the current allocations policy is unfair, and we look forward to working with ministers to create a system that is fair and flexible.

"What we need is a guarantee that a proportion of homes in each area will be given to specific groups - for instance low income couples - so that a wider range of people would have a chance of getting an affordable home."

However, Ms Davison dismissed the perception that migrants were jumping the queue for housing, pointing out that just 4% of housing association properties were let to non-UK residents last year.

She welcomed the £2.1 billion investment in new homes, warning that England faces "an unprecedented housing crisis" with up to 5 million people on waiting lists.

Sam Younger, the chief executive of homelessness charity Shelter, said: "New money for affordable housing is what Britain's crisis-hit housing industry needs. Building 110,000 affordable homes over the next two years will begin to tackle the severe lack of housing throughout the country and give families and young people the chance of a decent home."

Eileen Short, chair of Defend Council Housing and a tenant in Tower Hamlets, said: "20,000 new council homes would be a good start – councils should be allowed to start building them immediately, and to improve existing council homes too.

"This must go hand in hand with a moratorium: the Housing Minister must declare a halt on further privatisation, sell offs and demolition of council homes now."