Brown ushers in new era of council houses with councils given powers to buy repossessed properties

Amid mounting evidence of a looming price crash, ministers are set to launch proposals that would allow local authorities to buy up repossessed and unsold properties.

They may also get powers to purchase the homes of people struggling to meet mortgage repayments - then rent them back to the householder - to prevent families becoming homeless.

A new housing estate is built in Liverpool. The council helps first-time buyers in exchange for a stake in the property's equity

Local authorities would need extra Government money to finance the schemes, raising fears that council taxpayers could end up footing the bill.

However, hundred of millions of pounds already earmarked for building new homes could be diverted, effectively making the shift of policy cost neutral.

Town hall chiefs also argue that it could make financial sense in the long run by allowing councils to increase their housing stock while saving money on rehousing the homeless.

Gordon Brown is set to announce new council housing plans

The move would in effect reverse decades of Government policy which has encouraged tenants to buy their council houses.

Mr Brown is pinning his hopes of turning around his dire poll ratings on a series of measures to ease financial burdens on families.

Detailed proposals on housing could come as early as Tuesday but they will not include radical plans for a stamp duty holiday, or for councils to compete as mortgage lenders.

The announcement will come as the number of repossessions soars and the average value of a property slides down more than 10 per cent ina year.

Up to 300,000 homeowners are already in negative equity and there are warnings that this figure could rise to more than a million.

Chancellor Alistair Darling and Housing Minister Caroline Flint have spent three months coming up with a plan. Town hall chiefs gave it a cautious welcome yesterday but insisted more needed to be done.

'Anything that allows town halls to keep hardworking families in their homes during tough times will be hugely beneficial,' Paul Bettison of the Local Government Association said.

Gideon Amos, of the Town and Country Planning Association, suggested that allowing councils to intervene would help the whole market.

But Matthew Sinclair, of the TaxPayers' Alliance, said: 'This would be a big new exposure for taxpayers to the housing market, which as we have seen is very risky.'

LibDem Treasury spokesman Vince Cable said local authorities should also be able to buy unused land at a discounted rate to build new social housing.

A spokesman for the Department for Communities and Local Government said: 'We are determined to do everything possible to promote long-term stability and fairness in the housing market.'

History of the council house

The first council houses were built in Britain as a result of the Housing of the Working Classes Act 1890.

The first large-scale council housing was built after the First World War and slum clearance began after 1930.

The creation of the welfare state in 1942 and the Second World War saw a boom in council house construction. This continued into the '50s and '60s and at its peak around a third of households were council tenants.

Sitting tenants were given the 'right to buy' under the 1980 Housing Act.