Kate Allen and Jim Pickard

Heygate estate

Heygate estate, Southwark

London council estates should be demolished in order to build swaths of new houses for sale, according to Lord Adonis, one of the Labour party’s most senior figures.

Knocking down existing council housing would give the opportunity to build “mixed communities” that would function as “city villages”, the Labour peer said in a report.

The controversial recommendations come amid growing concern about the lack of affordable and social housing in the UK after years of above-inflation price growth.

The Tories are expected to revive Margaret Thatcher’s Right To Buy policy in their election manifesto by offering to expand the policy from council houses to housing associations.

Since the Thatcher years more than 2m council houses have been bought by their tenants — but this is harder for the 2.5m people currently living in “social housing”, owned by housing associations.

The policy has been championed by Iain Duncan Smith, the welfare secretary, and is backed by the Tory leadership as a way to woo “C2” skilled working-class voters.

Right to Buy is popular with many voters but has been blamed for worsening the shortage of social housing in Britain, with many of the sold properties not replaced.

Lord Adonis will argue that demolishing existing neighbourhoods and rebuilding at higher densities — including homes for sale at open market prices — can create a net increase in housing without needing any funding from the state.

The former cabinet minister believes that existing tenants could be housed in new properties on the site.

“The scale of council-owned land is vast and greatly under-appreciated,” Lord Adonis said. “There are particularly large concentrations of council-owned land in inner London, and this is some of the highest-priced land in the world.”

London councils own on average 25 to 30 per cent of the land in their boroughs, the report said. Southwark Council, for example, owns 43 per cent of the land it governs, while Islington owns about a third.

Low housing densities on many estates mean that the population of inner London is still 1.7m below its pre-second world war high — despite the fact that the city as a whole has this year topped that level due to population growth in outer areas.

Just 18,000 new homes were built in London last year, less than half of the 50,000 that housing analysts estimate the city needs each year.

Of the 3,500 council estates that Lord Adonis estimated lie within London’s boundaries, only about 50 have so far been redeveloped to add homes of other tenures. These saw the number of homes on the sites double on average, according to an analysis by estate agents Savills.

The report, to be published on Tuesday by think-tank the Institute for Public Policy Research, cited the example of Woodberry Down in Hackney, where 1,981 council flats in tenement blocks are being replaced by 5,550 homes for rent and sale.

Estate redevelopment can be politically controversial: the Conservatives lost control of Hammersmith & Fulham Council last year after signing a deal with listed developer Capital & Counties that would see the demolition of two council estates. The new Labour administration is negotiating with the developer over its plans.

Southwark Council has also been attacked by housing campaigners for its approval of developer Lend Lease’s demolition of the Heygate estate. Of the 2,500 new homes being built on the site, a quarter are for rent or subsidised ownership.

Lord Adonis said: “The local authority planning regime has got to adapt properly to the potential for [market-priced rent] developments” rather than taking “a binary view” of housing as being for sale or for subsidised rent.

Council estates in Britain house 2m people but “occupy land that could, theoretically, supply homes for many more people”, said Yolande Barnes, director of world research at property agents Savills.

London’s council estates “represent valuable reservoirs of increasingly scarce land in a global city”, she said.

A separate study by Savills has found that an extra 58,000 homes could be built within London’s boundaries by increasing the number of homes in existing areas in 21 “hotspots”.

Many council estates include homeowners who have purchased formerly council-owned properties through the Right To Buy.

But this would not stand in the way of rebuilding council estates, Lord Adonis said, adding that as the freeholder of the site, councils could pay off leaseholders and take possession of their homes.