A think tank is arguing that expensive council houses should be sold when vacant and the money reinvested in building cheaper homes.

The Policy Exchange’s comments have been welcomed by many in the building industry who are in desperate need of seeing rejuvenation in their sector.

The report 'Ending Expensive Social Tenancies' predicts that selling high value homes would raise £4.5bn a year, enough to build 80,000 to 170,000 social homes.

Neil O'Brien, the think tank's director, told the BBC that social housing would still exist in very expensive areas under its proposal, but there would just be "less of it".

He also suggested that the overall number of people waiting for social housing, currently around 1.8 million, could be reduced by about 500,000 if the scheme was implemented.

Gabrielle Omar, director of architect firm Lolli & Square, star of the most recent series of the TV-reality show The Apprentice, said: “The building industry has been witnessing a lot of setbacks of late – with stalled projects, fluctuating budgets and even construction firms going into administration all causing disruption.

“If they are incentivised to build properties that will be in demand, it will be great for the sector. It would be a great strategy for local councils, as it will allow them to unlock equity and provide homes for people in need.

“What concerns me is that will these ‘cut price’ homes could set a precedent of new generations of matchbox homes built cheaply and in constant need of repair. It would be important for each new home to be build and designed well in order for the local councils to protect their investments.”

Shadow housing minister Jack Dromey said: "Councils and housing associations should make effective use of their housing stock but the government should not force them to arbitrarily sell off social homes, breaking up mixed communities and driving out hard-working families on low wages from whole neighbourhoods."

He added that government should use a bank bonus tax to fund 250,000 affordable homes and "put unemployed builders back to work" to boost the construction industry.