Tories would give RSLs power to build private homes directly

The party also plans to overturn Housing Bill proposals to give development grant to private companies.

The Conservatives will start a month-long consultation on new housing policies early next month.

The consultation, with councils and housing associations, will inform policies that will be formally launched in October.

John Hayes, Conservative spokesperson for local and devolved government, said: “We’re looking at proposals to meet the affordability and social housebuilding challenges.”

At the moment, RSLs have to set up subsidiaries to build housing for sale, preventing many from creating mixed communities.

“We want to remove the barriers stopping registered social landlords getting involved in commercial activity,” said Hayes.

“Rather than giving money to private developers, we need rules that facilitate cooperation.

“It’s nonsense that unregulated companies should be given public grant to build. Associations are regulated for a reason – you must have a level playing field.”

Jim Coulter, chief executive of the National Housing Federation, said: “We would welcome the idea of breaking down some of the artificial boundaries stopping associations building private homes, and are happy to work with Hayes in formulating that.”

Brendan Sarsfield, chief executive of New Islington & Hackney Housing Association, one of the 10 biggest developing associations in England, said: “The intention is certainly right.

“Most important would be to see the Housing Corporation make a move on diversification of business – more freedom in the area would be a good thing.”

Hayes said the Tories would also consult on ways to improve shared ownership including extending models where a person can switch between renting and buying.