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Last Updated: Friday, 14 September 2007, 07:06 GMT 08:06 UK
Cash for councils building homes
House building
The government wants more affordable homes built

A 500m incentive for councils in England to build more homes has been announced by the government.

The cash will be shared out between councils that build enough homes within a set timescale.

The grants also depend on councils building a certain mix of housing - for example homes for young families rather than just flats.

Ministers wants three million new "green" homes built by 2020 to tackle a housing shortage in the UK.

The scheme, to be outlined on Friday by Housing Minister Yvette Cooper, is aimed at creating more homes for families and first-time buyers.

Ms Cooper said that despite concerns about building on green spaces, the truth about housing shortages had to be faced.

"I think we have to all face up to the fact we need more homes, otherwise people aren't going to get on the housing ladder in future.

"For the sake of our sons and daughters we've got to build more homes, but we've got to do it in a proper way that's protecting the green space, protecting the countryside."

BBC personal finance reporter Richard Scott said one explanation often put forward for the huge rise in house prices the country has seen was a shortage of supply.

Zero-carbon pledge

The government is concerned councils are not doing enough to identify the homes their communities need.

The money will be given to councils that increase home-building, identify land suitable for new homes and produce clear plans for speeding up the delivery of new homes.

Areas across the country where housing growth is a priority will be targeted such as the south Midlands and the Thames Gateway. The first payments are expected next year.

Research conducted by the National Housing and Planning Advice Unit found house prices will rise to 10 times average earnings by 2026 if new homes are not built.

House prices have nearly trebled in the past 20 years.

More than 200 extra disused brownfield sites have now been identified across the country where new housing can be built, the government has also said.

In addition it announced that more than 150 major organisations, including housebuilders, green groups and local councils have joined a partnership aimed at building 240,000 new zero-carbon homes a year by 2016.

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