By William James
BIRMINGHAM, England (Reuters) - Britain launched a 5 billion-pound ($6.5 billion) homebuilding stimulus package on Monday, including plans to borrow 2 billion pounds to help address a long-term housing shortage that has become a major economic problem.
The announcement comes on the second day of the ruling Conservative Party's annual conference, which the government is using to set out how it wants to leave the European Union and tackle social divisions exposed by the June Brexit vote.
Appealing to voters who have been shut out of the housing market by years of rising prices and tight lending conditions, the government said it wanted to spend 2 billion pounds ($2.6 billion) to boost housebuilding by using surplus public land and helping new homebuilders into the market.
"We'll use all the tools at our disposal to accelerate housebuilding and ensure that over time, housing becomes more affordable," finance minister Philip Hammond said in a statement before his speech to the conference.
Hammond will also promise to deliver a new economic plan next month, citing a need to balance the competing demands of fiscal discipline and long term investment as Britain comes to terms with its EU exit. [nL5N1C80P5]
The government also outlined how a 3 billion pound stimulus fund, made up of money already earmarked for housing, would be used to fund 1 billion of short-term loans to small homebuilders and 2 billion in long-term infrastructure projects.
The new fund would help build 25,000 new homes by 2020 while the plan to use public land would enable the building of a further 15,000 in the same period.
Those targets are modest compared to the estimated 300,000 homes per year that a committee of lawmakers estimate Britain needs to meet demand and cool price growth. The country has not built more than 200,000 homes in single year for a decade.
Although the housing market has shown signs of cooling since the vote to leave the EU, a chronic shortage of properties keeps prices out of the reach of many young and low-income Britons.
Hammond's predecessor, George Osborne, made several attempts to speed up home building during his six years in the job.
"It is only by building more houses that we will alleviate the financial burden on those who are struggling to manage," said Sajid Javid, the minister in charge of local government.
($1 = 0.7743 pounds)
(Additional reporting by William Schomberg; Editing by Ruth Pitchford)