This marks a return of the local authority to the centre stage in providing homes for communities but in a new way - through Local Housing Companies (LHCs).

Councils will be able to offer their own deals for key workers and first time buyers through new homes built on their land. Thousands more young families could get a step onto the housing ladder as a result if councils take up this option.

New guidance for establishing LHCs was published today for the first 14 local authorities who have expressed interested in the scheme.

Yvette Cooper said:

" Local Housing Companies are a new radical partnership between councils and the private sector being tested as one of a range of models to help local authorities to bring forward land for housing development, in particular to help increase the supply of affordable housing.

Currently, councils once they sell off surplus land to the private sector have limited influence over how it is developed, or the type and quality of housing provided.

But new Local Housing Companies could put the destiny of that land back into the hands of councils enabling them to double affordable housing levels to at least 50 per cent on sites, and directly offer key workers and first time buyers shared equity deals."

Under the proposals to be piloted, councils would provide their surplus public sector land to the Local Housing Company. The local authority would play a full part in agreeing the development plan, including being able to directly offer low cost housing deals to meet local needs.

In return for taking the land cost out of the equation, private sector partners such as house builders, including the would provide equivalent investment and the construction expertise needed to build the new homes.