This £1bn borrowing cap raise will be split equally between London and the rest of England. It will be granted to areas with the highest affordability pressures to ensure homes are built where they are needed most.

These new measures are part of the government’s ambitious plans to build 1.5m new homes by 2022 through planning reform and targeted investment.

The government also revealed that £1.67bn of previously announced housing funding would be used to build 23,000 affordable homes, including 12,500 for social rent.

James Brokenshire, secretary of state for housing, said: “Today’s announcement is a further milestone. It will secure the delivery of an additional 23,000 much-needed affordable homes as well as paving the way for a new generation of council houses.

The majority of these new homes will be in high cost areas helping to ease the burden of rent on families and delivering stronger communities.

A list of successful councils will be announced in the autumn. Successfull local authorities will be able to draw down additional borrowing from April 2019 onwards

At the high point, councils were building more than 120,000 homes per year. But in the 1970s and 1980s this fell to an average of about 60,000 completions each year and to an all time low of just 50 dwellings in 2000.

Delivery has since increased and local authorities are now building around 3,000 homes per year.