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The government is targeting a million new homes by 2020 Getty

The Right to Buy for housing association tenants should be radically expanded if the government wants to meet its target of building a million new homes by 2020, according to a think tank.

Policy Exchange, which is pro-free market, said relaxing some of the rules for housing associations is essential to meeting the housebuilding target.

Individual "housing deals" should be struck between the government and associations, said the think tank's report, in which they commit to higher building rates in exchange for being allowed the freedom to decide the type of homes they build with public money, to charge higher rents, and to take on more debt to fund construction. They need to build 100,000 homes a year for the government to reach its target, double what they are currently achieving.

They need to build 100,000 homes a year for the government to reach its target, double what they are currently achieving.

There is a shortage of housing in the UK which is driving up rents and house prices. Little over half of the new homes needed are built each year. Policy Exchange argues that private housebuilders are limited by strict planning rules and the build to sell model, which restrict the level of supply they are able to deliver.

Since the Housing Act came into force, the Right to Buy scheme, which allows council tenants to purchase their properties at a discount, has been extended on a voluntary basis to housing associations.

Policy Exchange said to incentivise more housebuilding, housing associations should allow a shared ownership option under Right to Buy; give existing tenants the opportunity to buy new-build homes not just their own; offer them five-year fixed rate mortgages; and give them a cash allowance to help with maintenance and repair costs.

"The government needs to urgently move away from a one size fits all policy towards housing associations if it is to meet its target of 1 million new homes by 2020," said Chris Walker, head of housing, planning an urban policy at Policy Exchange.

"A new settlement will give well run housing associations freedom to run their own organisations in the most efficient manner, incentivising them to borrow to build and providing opportunities for people on low incomes to become part of the property owning democracy."

A spokesman for the Department for Communities and Local Government (DCLG) said housing associations have committed to delivering an additional affordable home for every one sold off under the voluntary Right to Buy scheme.

"We have set out the largest housebuilding programme in a generation, doubling the housing budget so we can deliver on our ambition to build a million extra homes," he said. ""Housing associations have a vital role to play in that, and we continue to work closely with the sector to ensure they deliver new homes as effectively as possible."