Shadow Chancellor Ed Balls said the provision of guarantees to help small and medium-sized builders to access finance could transform housing delivery.
These firm have historically played a key role and used to deliver around two thirds of all new homes. But difficulty in raising finance on reasonable terms has seen this shrink to less than one third over the past five years.
Current Government guarantee schemes only support major infrastructure projects being developed by major house builders.
Balls said his plan could lead to an extra 10,000 homes a year being built and would help tackle increasing concentration in the house building market.
"If you look at the big housebuilding programmes of the 50s and 60s there was a much larger place for medium and small housing developers," he said:
Mike Leonard, CEO of the Modern Masonry Alliance, welcomed the proposal to put local companies back into the driving seat.
He said: “Releasing the finance to allow local house builders back into the market is vital if we are deliver the homes of all tenure we desperately need across the UK.
“We applaud this proposal, if implemented, it could provide major assistance to those developers who have been unable to raise 25% plus deposits or have been unable to get any finance due to the major banks withdrawing from lending to small developers over the last five years.
“This is the next positive step we need to Get Britain Building and create sustainable jobs and growth.”
