In a fiery speech at a leadership hustings in Bristol, the shadow foreign secretary said there needed to be stronger legislation to punish wealthy landlords who let their properties sit vacant.
“We need to build more homes… and we need to do it by way of carrot and stick, so we need to have government money going in to building more affordable housing, social housing and council housing,” Ms Thornberry said.
“But we also need a stick and we haven’t got a big enough stick at the moment.”
The Labour MP warned supporters that the UK risks “leaving a whole generation behind” because so many young people cannot afford to buy their own home.
She added: “As for all these empty flats, for these people in China who think, 'Let's either buy a gold bar or buy a flat in Bristol' – no!”
“You're not allowed to buy a flat in Bristol as an investment and keep it empty. If you keep it empty, you lose it.”
The shadow cabinet minister has also called for councils to be allowed to take back land from developers who fail to act on planning permission within five years of gaining approval.
In its 2019 manifesto, Labour called for developers to face new “use it or lose it” taxes on stalled housing developments.
Ms Thornberry is currently campaigning for a place in the final stage of the leadership race to succeed Jeremy Corbyn.
She is the only candidate out of the four still running who has not guaranteed her place on the ballot paper which will go out to members.
With most of the major unions backing other candidates so far, Ms Thornberry’s most likely route to the ballot is to secure 33 nominations from constituency Labour Party (CLP) branches.
On Friday night, she had the backing of only nine CLPs out of a possible 189 branches so far.
When asked about her view on the housing crisis, leadership candidate Lisa Nandy said the pressure on the UK’s housing stock had been caused by a “broken economic model”.
The Wigan MP said some former industrial towns had homes “boarded up” because they were unaffordable, which she said was a “consequence of jobs having departed those areas and the young people with them”.
“The flip side is what is happening here in Bristol. Where are those young people going? They’re moving to the cities,” Ms Nandy said.
“So we are overheating one part of our economy and completely underusing and under-appreciating another.
“That's why we have the high house prices and the inability for young people to get on the housing ladder.”
Rebecca Long-Bailey, the shadow business secretary, said there needed to be a “dramatic council house building programme” like the “one [Labour] set out in the last manifesto”.
“Housing is a basic human right and we are not providing our people with that basic human right at the moment,” Ms Long-Bailey said, as she called for more “quality” housing to be built.
Early frontrunner Sir Keir Starmer said more houses were required at “rents and rates that people can actually afford”.
He said overcrowding in London was having a negative impact on children's learning and labelled the current situation “disgraceful”.
“Don’t see it as a housing issue, see it as a much bigger social justice issue because that’s what it is,” Sir Keir said.
Additional reporting by PA
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