The scheme is eligible for households earning £60,000 a year or less. It will let the buyers rent a new home at a discounted rate for a period of two to three years.
They will then have the option to buy a part share in the home. The affordable rent, which will be 80 per cent of the market rent or less, will enable the household to save for a deposit to buy the share in the home.
Housing minister Caroline Flint has also proposed to deliver up to 75,000 homes in 20 more towns and cities, with £100m into these areas for the schools, hospitals and other facilities needed to support homes.
Councils from Northumberland to Cornwall have been selected as New Growth Points and have pledged to increase the number of homes in their local areas by up to 20 per cent by 2016.
Flint says: “The package being announced today will both help people facing difficulties right now, and lay the foundations to help meet the long term housing needs of the country. That means being ambitious, but also practical and realistic, acknowledging not only the difficulties faced by individuals and families, but for those who work in the house building industry.
“We are determined to continue to do everything possible to promote long-term stability and fairness in the housing market. The international credit crunch has created significant challenges not just for the UK housing market, but in other parts of Europe and the United States.
Flint adds: “However, the long term need to provide more homes has not gone away. We have a growing and ageing population and will only see worsening affordability unless we increase housing supply.”