Endorsement of controversial measure is seen as attempt by former prime minister to re-engage with British politics

Tony Blair is backing one of the most controversial measures raised in Labour’s last manifesto, by supporting a new “land value tax” designed to help solve the housing crisis.

The former prime minister said the new tax, which sees the value of underlying land taxed rather than property, should replace council tax and business rates to create a “fairer and more rational system of property taxation”.

His endorsement of the idea will be seen by some as a shift to the left. However, he said he wanted to embrace a radical policy platform that “abandons the timidity of the Conservative policy and avoids the present regression of Labour policy”.

The measure is one of a series of policies designed to tackle the housing crisis included in a new report by the Tony Blair Institute for Global Change. It also backs a new sovereign property fund, to help councils build, and supports the extension of minimum rental tenancies of three years, with a cap on rent rises.

Blair said the ideas were “radical but practical; progressive but in a way which aligns with the modern world and is not in defiance of it”.

A land value tax is an annual charge levied on the value of land itself. Supporters say it would stop developers from “land banking” and get building. Labour’s last election manifesto pledged to hold a review of the idea, but critics dubbed it a “garden tax”.

Successive governments, including Blair’s, repeatedly avoided dealing with the council tax system – which is based on wildly out-of-date house price valuations – because of the politically explosive consequences of updating it. Doing so could see some asset-rich but cash-poor people, such as elderly homeowners, hit with big bills.

In his foreword to the report, Blair states that solving the housing crisis will help “resolve part of the underlying causes of political alienation and dissatisfaction with democracy”.

It is the latest attempt by Blair to re-engage with British politics. Friends say he is more interested than ever in domestic issues. However, some believe the damage done to his reputation by the Iraq invasion and his money-making activities since leaving office make it hard for him to receive a hearing for his latest ideas.

The paper takes on several issues that have been dodged by repeated governments, including loosening protections for the green belt and the obsession with home ownership. It calls on renters to be given longer minimum tenancies, a limit on rent increases and stronger eviction protections.

It recommends a sovereign property fund, set up to support councils in building homes, which would be able to reclaim underused property through the expanded use of compulsory purchase. The report, by researcher David Adler, backs linking rent rises over three-year periods to inflation.

Blair acknowledges that such a programme is impossible to discuss “without contemplating yet again the extraordinary and damaging distractive effect of Brexit”. He said it was part of a policy platform designed “to show those who voted for Brexit there is a different and better way of meeting their genuine concerns”.