The Home Builders Federation has called for Alistair Darling to take ‘radical action’ in next week’s pre-budget report to help the ailing housing market.

The federation, which represents 300 companies, said government moves to assist the sector so far have not been comprehensive enough.

It is calling for the Chancellor to insist on sensible levels of mortgage lending return following the injection of government funds into the banks last month.

A significant part of the Housing Corporation’s budget, which will not be spent because of the downturn, should also be reallocated to buy empty new homes and to unlock sites, the HBF said.

Sites could then be developed with an injection of public money through public-private partnership agreements.

The HBF is also calling for incentives to be put in place to encourage new sources of housing demand, such as institutional investment in private housing and Self-invested Person Pensions (SIPPs).

‘We have reached the stage where radical and decisive action is needed to assist the housing market,’ said Stewart Baseley, executive chairman of the HBF.

‘With the housing market so absolutely critical to the wider economy, the Chancellor cannot miss the opportunity presented by the pre-budget report.

‘Allied to the long awaited cuts in interest rates, restoring mortgage lending, injecting cash directly into building projects and introducing measures to encourage large new investment in residential property would boost the housing market, the benefits of which I believe would ripple through the economy.’

The pre-budget report is due to be released on Monday.