Council chiefs have called for extra powers to allow them to offer competitive mortgages in an attempt to rescue the housing market.
In a letter published in today's Times, they argue that the public sector should be able to help first-time buyers and those unable to secure a home loan. Critics believe that the move could lead to higher council tax if borrowers defaulted.
The councillors want to borrow an extra £2bn from the public works loans board, a Treasury agency that allocates funding for capital public sector projects. They are pressing for the idea to be discussed at a Cabinet meeting on September 7, when the Prime Minister is expected to draw up the Government's solution to the housing crisis.
Caroline Flint, the Housing Minister, is said to be sympathetic to it but Treasury ministers are less so.