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Gordon Brown has pledged to put £2.1 billion into housing to ensure 20,000 affordable homes are built in the next two years.

The prime minister told the House of Commons the extra investment will more than triple the £600 million announced in the most recent Budget, and the new house building will create an estimated 45,000 new jobs in construction and related industries.

The cash amounts to around £1.5 billion of new money, which has been reallocated from within the Communities and Local Government department, and shifted from other government departments. Mr Brown said it would allow 110,000 homes to be built over two years, a 20,000 increase on the previous target of 90,000.

‘I can and will give local councils other powers to respond to local pressures’

Housing minister John Healey

He said the increase in housing would allow councils to allocate homes to local people: ‘By building new homes we will allow local authorities to give more priority to local people who have been on waiting lists for far too long.’

And he said the government would consult on proposals to allow councils to keep the money they make from the selling and renting homes. Under the current system the money goes into a central government pot, and is then reallocated.

‘[This will mean] a bigger role and responsibility for local authorities to meet housing need in their areas,’ Mr Brown said.

The proposals are set out in a document, Building Britain’s Future, which outlines the policies the Labour government will be looking to implement in the run up to the general election.

Other commitments in the paper include a nationwide expansion of the choice-based letting scheme, which helps social tenants move home, and an ‘autumn crackdown’ on fraud in the sector. Details of this are expected in the next few weeks, but the paper promises it will concentrate on ‘freeing up homes for those in need’.

On the allocation of homes, the paper states that the government will ‘change the current rules for allocating council and other social housing, enabling local authorities to give more priority to local people and those who have spent a long time on waiting lists’. It adds that the reforms will preserve security of tenure.

Housing minister John Healey promised the new local allocations system would not mean neglecting those most in need of housing.

‘To be clear, I am not changing the requirement to give priority to those in serious housing need, but there will be more scope,’ he said.

Mr Healey said that the new investment would mean councils would build about 3,000 new homes, four times the amount the government had previously expected them to build.

Housing associations will be able to build 12,500 new affordable homes, at least 7,000 of which will be for social rent.

Extra funding for the Kickstart programme to fund stalled developments will mean another 13,000 homes will be delivered – 4,000 of them affordable.

Mr Healey refused to reveal the exact source of the £1.5 billion. He said it was the result of ‘hard decisions within government’ and came from ‘switching it within the department’.

Ruth Davidson, director of campaigns and neighbourhoods at the National Housing Federation, said a review of the housing allocations policy would be welcome. ‘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,’ she said.

She added that the investment in building affordable homes is ‘great news for those on waiting lists’ and stressed housing associations are well positioned to deliver on the government’s house building ambitions.

But the leader of the Conservative Party, David Cameron, told Mr Brown that his spending plans are unrealistic.

‘House building is at the lowest level since 1947. People are entitled to ask him what world he is living in,’ Mr Cameron said.