Plans for a new levy on tens of thousands of second homes have been drawn up by Labour in a move designed to ease the housing crisis and generate funds to cut homelessness.

Second properties used as holiday homes would be the target of an annual tax should Labour win the next election, with each property facing an average levy of about £3,000 a year. It is the latest sign that Labour is prepared to back radical policies to show it is preparing for government and willing to target new taxes on wealth. The move could hit as many as 174,000 properties in England and raise up to £560m a year.

Labour has earmarked the money to battle homelessness, particularly the growing number of children living in temporary accommodation. Recent figures show that there are more than 120,000 children homeless in this type of emergency housing – up two-thirds since 2010.

The new levy would be based on a property’s council tax band, and represent a doubling of its council tax bill. The extra money would be sent to the Treasury rather than kept by councils.

It would only be applicable to second homes primarily used as holiday houses, and would not include homes that are rented or used for employment, or static caravans. Areas that would be affected include Cornwall, north Norfolk and parts of the Lake District. However, the policy will provoke claims that it would rely on second homeowners being honest about the use of their property. It could also be complicated to collect the money.

John Healey, the shadow housing secretary, said the tax was needed to raise funds for a homelessness crisis that “shames us all”.

“Over the last eight years, the government has turned its back on the scandal of poor housing and homelessness,” he said. “A housing market that works for the many, needs government action to ensure everyone has a place to call home.

“As part of the next Labour government’s plan to rebuild Britain, we will introduce a levy on second homes used as holiday homes, to help homeless families. Labour will act to put a brake on the growing gap between Britain’s housing ‘haves’ and ‘have-nots’.”

The party said that second home-ownership is at the heart of widening wealth inequality. Research by the Resolution Foundation thinktank recently found that nine in 10 additional property owners are in the top half of the wealth distribution.

In a report last year, it said there had been a 30% increase between 2000-02 and 2012-14 in the proportion of adults that owns multiple properties, rising 1.6 million to 5.2 million people.

Meanwhile, home ownership has fallen among the young. The chances of a young adult on a middle income owning a home in the UK have more than halved in the past two decades, according to the Institute for Fiscal Studies. For 25- to 34-year-olds earning between £22,200 and £30,600 per year, home ownership fell to just 27% in 2016 from 65% two decades ago.

All parties have vowed to tackle the housing crisis, with the government passing legislation earlier this year to allow councils to charge double the rate of council tax on homes left empty for years. Derek Thomas, the Tory MP for St Ives, said in a speech in June that he wanted to see “an additional council tax premium of up to an additional 100% from second homes”.

Healey said: “Tonight, more than 120,000 children will go to sleep in temporary hostel-type rooms, some sharing toilets or bathrooms with people they don’t know. These are the kids that can’t go home, whose family is homeless for want of decent, affordable housing. And to our national shame, their numbers have increased every year since 2010. At the other end of the housing market, thousands of properties are owned as second homes, either for investment or for holidays and weekend breaks.

“The housing crisis is part of a crisis of inequality – a market in which the housing wealth divides have widened following the global financial collapse a decade ago, as homeownership has continued to rise for the richest 10% and fallen for the least wealthy half of the population.”