A Labour government would introduce a new agency with powers to allow councils and developers to buy land at “near current use value” to build low-cost homes.

Shadow housing secretary John Healey said a proposed Sovereign Land Trust would bring an end to land changing hands at much higher prices when earmarked for development.

Speaking to the Financial Times, Mr Healy commented: “The policy would apply across the board. So we take land profiteering out of the market and reduce the cost of land as an inflated component of the cost of homes that are eventually built.”

Under the Land Compensation Act (1961) councils cannot buy land at its agricultural value and instead have to pay a “hope” value, calculated as if planning permission had already been granted to the site.

A report produced for the Labour Party by Nicholas Falk of the Urbed Trust points to examples from overseas, such as Leipzig in Germany and Eindhoven in Holland, where public planning has been used to drive regeneration.

Mr Falk suggested a range of options regarding the sums state buyers might pay private landowners, “with the general principle that the value of a serviced housing plot should be 25% of the total value” – broadly in line with Dutch and German examples.

Labour says it would use the new agency to buy non-Green Belt land close to cities and to support regeneration projects in so-called “left-behind” towns in northern England and elsewhere.