Labour considering revival of development corporations to build new towns on scale of those built after second world war

Ed Balls will commit Labour to building a wave of new towns and to Treasury financial guarantees to provide cheap funding for builders, as part of a commitment to build 200,000 new homes a year by 2020.

The shadow chancellor will also say he wants to look at the revival of development corporations as vehicles to build new towns on the scale of those built after the second world war.

The government's promise to build new towns has withered in the face of resistance from Tory councils and a lack of enthusiasm in the Department for Communities.

Under David Cameron, housebuilding has reached its lowest postwar figure. In the 12 months to August 2013, housing completions fell by 9% to 106,820. The proportion of affordable homes also fell, but the industry says there have been strong signs of a pickup from a low base since the summer.

Labour has said little about how it intends to reach its target of 200,000 new homes a year by 2020, first announced by Ed Miliband in his Labour conference speech.

In a speech to the National Housebuilding Council on Thursday, Balls will say housing must be at the centre of Britain's economic policy.

He will promise to look at whether and how to give new town development corporations the right to keep increased revenue from business rates as a revenue stream to finance investment.

He will also propose giving them powers to use the increased value of land to generate further capital for investment, as well as to acquire and assemble land.

Balls will say: "We should draw on the lessons from the past of how the new towns were developed after the second world war by development corporations, which had the powers to acquire, own, manage and dispose of land and property; undertake building operation; provide public utilities; and do anything else necessary to develop the new town.

"These corporations generated revenue by selling land and housing, receiving rental income and receiving commercial income. However, they needed upfront funding to build the infrastructure and housing which could later be sold at a profit."

He argues that Treasury guarantees may be essential for development corporations if they are to have the confidence to start large-scale growth programmes.

"We cannot afford to dither any longer, and I cannot see a stronger case for the full-throated backing of the chancellor than a step change in housing supply," he will say. "Unless we build more affordable homes, house prices relative to earnings will remain high, houses will remain unaffordable, and many people will never realise their dream of owning their own home."

He will say Labour supports Help to Buy, but will argue that the Bank of England should review the details of the scheme, including the very high £600,000 cap, immediately and every six months thereafter.