The Government is to directly commission thousands of new homes on publicly owned land, giving smaller house builders the chance to build them.

The first phase will consist of up to 13,000 homes, of which up to 40% will be discounted starter homes, available to first-time buyers at a 20% reduction.

The first five sites are in north-west London, Northstowe in Cambridgeshire, Dover, Chichester and Gosport in Hampshire.

Altogether, over the next five years, other brownfield sites will be fast-tracked for planning and development, leading to the creation of at least 30,000 new starter homes on 500 sites.

The Government described the initiative as a “radical new policy shift not used on this scale since Thatcher and Heseltine started the Docklands”.

The Government had earlier announced a commitment to creating 200,000 starter homes by 2020.

David Cameron said: “This government was elected to deliver security and opportunity – whatever stage of life you’re at. Nothing is more important to achieving that than ensuring hard-working people can buy affordable homes.

“Today’s package signals a huge shift in government policy. Nothing like this has been done on this scale in three decades – government rolling its sleeves up and directly getting homes built.”

House builders were muted in their reaction, while a rural body was utterly damning, saying that the scheme would not even help rich young bankers get on the housing ladder.

Stewart Baseley, executive director of the Home Builders Federation, said: “House building rates have been increasing at the steepest rates for decades, with additional supply reaching 171,000 last year.

“But we welcome the fact that the Government is clearly prioritising housing supply rates, particularly with regard to streamlining the process of building homes on public sector land.

“If we are to address the chronic shortage of homes that has developed over decades, strong government leadership is essential.

“Allowing smaller builders to access publicly-owned sites is a welcome move that must be part of wider set of measures to assist SME builders and get more ‘players on the pitch’.

“Clearly the devil will be in the detail and we await further information.

“Direct commissioning will only be successful if it speeds up the release of public sector land and results in more house building than would have happened using the more traditional methods of public-sector land disposal.

“A lower-risk model could allow larger builders to increase their output still further, while also enabling smaller house builders to increase output.

“Both have an essential role to play. It is not a question of either/or.”

The Campaign to Protect Rural England was totally damning, saying that the Government’s plans to build 13,000 homes for sale “at just 20% off ludicrous market values is a fatuous response to the biggest housing crisis since the second world war.

“At best it will help those younger people on salaries far above the average, especially in London.

“Even a banker on £100,000 a year would struggle to raise a £400,000 mortgage, and that assumes a deposit of at least £50,000, far above the average salary at £25,000, and utterly unreachable by anyone else.”