First-time buyers offered £60,000 homes

First-time buyers are to be offered homes for £60,000 under plans by John Prescott to get more people on the property ladder. The Deputy Prime Minister also announced yesterday that an estimated 300,000 families in housing association or council property are to be allowed to buy a minimum stake of 50 per cent in their homes.

First-time buyers are to be offered homes for £60,000 under plans by John Prescott to get more people on the property ladder. The Deputy Prime Minister also announced yesterday that an estimated 300,000 families in housing association or council property are to be allowed to buy a minimum stake of 50 per cent in their homes.

Up to 80,000 first-time buyers will be helped by the construction of low-cost starter homes on public land, including 100 former NHS sites. English Partnerships, a quango in charge of regeneration, will offer 30 per cent of the houses for a target price of £60,000.

Half of the homes will be offered to public-sector workers, such as nurses and police community support officers, in equity stakes of 10 per cent. The price of the land is likely to cost an extra £40,000 and English Partnerships will retain a 40 per cent stake in the property until the buyers pay off the full cost. Mr Prescott said 1,000 homes would be built under this initiative by 2007.

The Deputy Prime Minister is pressing cabinet colleagues including Geoff Hoon, the Defence Secretary, to surrender more surplus land to English Partnerships to build low-cost homes. A competition will be run for contractors to build the estates at minimum cost.

Mr Prescott struck a compromise plan to extend the Tory right to buy, resisting pressure by Alan Milburn, Labour's election campaign chief, to match a Tory plan to offer tenants of housing associations the right to buy their homes outright. He feared it would lead to a big reduction in the stock of social housing available to rent. Mr Prescott was also warned it could be illegal to force housing associations - more than half of which are charities - to sell their property to their tenants.

Under the compromise plan, which could initially reduce the social housing stock by 50 per cent, council and housing association tenants will be offered discounts of up to £16,000 to buy a share in their own flats or houses. When they leave, they will be able to sell their stake at a price agreed by an independent valuer. Housing associations and councils will be able to use the receipts to build more property for rent.

But the proposal, which will be included in Labour's election manifesto, came under fire from the Tories last night for being too restrictive. Housing associations will have the first refusal to buy back the property and it will be voluntary, so it may not be available to tenants of housing associations or councils that do not support the scheme.

A Tory spokesman said tenants would be denied the right to cash in on higher bids. Caroline Spelman, the shadow local government minister, said: "Under Mr Blair, housing association tenants would be told who they can and cannot sell their share of the property to, and be forced to ask permission to make any home improvements; hardly home ownership."

Ed Davey, the Liberal Democrat spokesman, attacked the Tory plans, saying more housing was needed, rather than cuts in housing budgets. He also criticised Mr Prescott's cabinet colleagues for "clinging on to unused land when so many are crying out for homes". He said new property land trusts with the mutual sector should be set up.

Mr Prescott said there was a "wealth gap" between tenants and home owners, caused by the soaring cost of housing, which has outstripped earnings, particularly in the South-east. Tony Blair, who is seeking a tenant for his £3.5m five-bedroom house in Connaught Square, visited a two-bedroom flat in a housing association development in west London with Mr Prescott to highlight the plans. Trying to buy a home as a first-time purchaser is "very, very tough", Mr Blair said.

Mr Prescott said higher prices could be good news for homeowners, but they made it harder for younger, poorer people to buy property. There was a drop of 29 per cent in the proportion of first-time buyers seeking home loans last year.

The Government is also trying defuse a backlash by "Middle England'' over its plans to allow 1.1 million homes to be built in the four development areas in the South-east; in Ashford, Kent; Milton Keynes; the Thames Gateway in east London and the M11 corridor to Stansted. Mr Prescott issued new guidance on the green belt requiring applications for "inappropriate" development to be referred to him.