Government bails out builders by buying houses they can't sell

They also announced a new scheme to help households earning up to £60,000 a year get on the property ladder by renting first and then buying.

The move highlights the difficulties faced by even reasonably well off firsttime buyers, particularly in London.

Housing Minister Caroline Flint: the government today unveiled plans to buy up homes which housebuilders are unable to sell.

Housing Minister Caroline Flint has already earmarked £200 million to buy up surplus housing stock, for which crisis-hit housebuilders cannot find buyers, and turn these into "affordable" homes.

Today she announced that extra millions will be allocated to expand the scheme but stressed the properties had to meet housing needs.

The Housing Corporation is in talks with many of the major housebuilders on bringing unsold homes into the affordable housing sector.

Households earning up to the £60,000 threshold will also be able to rent a flat or house at a discounted rate for two or three years under the new Rent to Home buy scheme.

They will then have the option to buy a share in the home, starting from 25 per cent of the property. The affordable rent will be set at no more than 80 per cent of the market rate to allow people to save for a deposit to buy the property.

Ms Flint said: "We are determined to continue to do everything possible to promote long-term stability and fairness in the housing market. The international-credit crunch has created significant-challenges not just for the UK housing market, but in other parts of Europe and the United States.

"However, the long-term need to provide more homes has not gone away. We have a growing and ageing population and will only see worsening affordability unless we increase housing supply.

"That means being ambitious, but also practical and realistic, acknowledging not only the difficulties faced by individuals and families but for those who work in the house building industry."

She also confirmed that Barking and Dagenham will be one of four areas to get new "local housing companies"  -  partnerships between the council and the private sector  to provide new homes on surplus land. The other three are Newcastle, Nottingham and Manchester.

Other measures announced today include allocating the first tranche of a &510 million pot for councils which have helped make land available for development and plans to build up to 75,000 homes across 20 towns and cities with high demand.