DEPUTY Prime Minister John Prescott is set to launch a competition challenging contractors and house builders to come up with designs for houses which can be built for less than £60,000.
Mr Prescott will reveal full details of the competition at the Sustainable Communities Summit in Manchester next week.
Initially contractors and manufacturers will be invited to showcase how to build cost-effective, quality homes over a range of housing types.
Winning firms will be asked to build 1,000 units over several sites owned by English Partnerships.
About 30 per cent of the units within the competition will be built to a target cost of £60,000. Larger and smaller homes are expected to be built to a comparable cost, depending on the size.
Joe Martin, executive director of the Building Cost Information Service, estimated that with infrastructure costs and a private company's margins taken into account, the homes could be sold for around £100,000.
The homes would be built by private companies or housing associations and the purchasers would buy the house, but not the freehold or the land, in a bid to substantially reduce the overall price tag.
Mr Prescott's five-year plan follows a review of future housing needs carried out last year by economist Kate Barker.This concluded that between 70,000 and 120,000 new homes should be built each year to curb house price inflation.
The Royal Institution of Chartered Surveyors warned that building cheap homes will not solve the problem alone and without proper supporting infrastructure any new communities would be unsustainable. It also called for the stamp duty threshold of £60,000 to be reviewed.
RICS director of policy Michael Chambers said: 'Although the Government is now putting more money into social housing, the additional amounts are small in comparison to the size of the problem.
'RICS would like to see more help for first-time buyers and in particular a commitment to review the stamp duty threshold, which is currently £60,000.'
The housing plan is aimed at helping first-time buyers and key workers to get onto the first rung of the property ladder through the creation of more affordable housing.