£1bn to boost the building of cheaper homes

The biggest programme of investment in affordable social housing for a quarter of a century was promised yesterday by the Chancellor.

The £1bn boost for home-building is aimed at easing the severe housing shortage and the resulting pressure on property in prices in London and the South-east. Ministers have faced bitter protests from public sector workers, such as teachers and nurses, that they can no longer afford to live in the home counties.

Gordon Brown said spending on housing had already risen from £2.3bn in 1997 to £4.8bn this year and would increase to £5.9bn in 2005-06. He said: "Now, as the demand for new and better housing grows in a growing economy, it is time for a further step change, with the most sustained rise in housing investment for 25 years."

John Prescott, the Deputy Prime Minister, will spell out details tomorrow of how the Housing Corporation will spend the extra money. He will also announce more help for low-paid public sector workers to get a foot on the property ladder.

With fewer houses constructed last year than at any time since the 1930s, ministers have been warned that just two-thirds of the houses needed are being built.

The Tories have protested that surging demand for housing could result in the loss of green-belt land across the South-east. But Mr Prescott is expected to promise that widescale development will be limited to four areas with good commuter links to London – Stansted in Essex, the Thames Gateway to the east of London, Ashford in Kent and Milton Keynes in Buckinghamshire.

Mr Prescott will also announce reforms to the planning system, including a boost in the number of council planning officers. But in return developers will be told to build a great number of homes per square mile, and more affordable homes.

Neil Sinden, assistant director at the Council for the Protection of Rural England said: "The extra money will help deliver much needed social housing but it must be used to underpin urban regeneration, otherwise it will only fuel further greenfield sprawl."

Hugh Ellis, of Friends of the Earth said: "The Chancellor should concentrate on tackling the widening inequalities between the South-east and other regions and on promoting sustainable economic development. Planning new airports and sacrificing the green belt is a damaging substitute."

The housing charity Shelter welcomed the extra money, but said it had to be targeted at "those at the sharp end of the problem". It said a record 81,000 families were homeless or living in "the misery of temporary accommodation".