The housing secretary has been working up plans for a state-owned housing developer, according to details leaked to the Guardian, as the government looks for ways to stimulate stubbornly low rates of housebuilding.

Steve Reed has been looking at proposals to set up a new state-owned developer which could borrow at lower rates than private developers and housing associations, according to plans leaked to the Guardian.

The plans, which are not yet finalised, cannot be enacted before Keir Starmer steps down as prime minister, after the cabinet secretary ordered that no major announcements should be made until after the new government takes office.

However they could appeal to the most-likely next prime minister, Andy Burnham, who has talked about taking greater public control over “the essentials of life”.

Starmer took office two years ago promising a major uptick in housebuilding, and to achieve this has liberalised the planning system and allocated £39bn to social and affordable homes over the next 10 years.

The government’s stimulus measures have boosted the number of new houses built since the lows of late 2023 and early 2024. Ministers announced last week that there had been a 26% increase in the number of affordable homes started in the past 12 months compared with the previous year.

Overall building figures however remain well below where they were three years ago and where they need to be to hit the government’s target.

Starmer promised to build 1.5m new houses over the course of this parliament but the government’s latest statistics show builders began work on just 130,170 in the past 12 months – half of what would be needed on average to hit the target.

Much of the problem has been the high cost of material and debt. Wars in Ukraine and the Gulf have pushed up inflation, and with it the cost of building new properties.

Housing associations warn that the way the government’s affordable housing budget has been allocated – with much of the money coming in the latter years of the scheme – risks making the problem worse.

Meanwhile, Reed and the London mayor, Sadiq Khan, have agreed to slash affordable housing quotas in a bid to encourage private developers to build more.

Reed is now understood however to be looking at more radical proposals to intervene in the market.

Under his plans for a state-owned developer, the government would use money currently allocated to Homes England to set up a new independent body to oversee new housebuilding.

The organisation would use the government money to buy land and develop new projects. It would not take over the construction, but use private companies to do so. It could also be granted borrowing powers, which would enable it to become a far bigger entity but is likely to push up the levels of government debt.

The state-owned developer would build all kinds of houses – including in one iteration of the idea, commercially available properties – which could see it compete with some of the country’s biggest housebuilders.

It would also build affordable homes, taking over some of the role currently played by housing associations, which are so cash-strapped they are struggling to buy up the subsidised properties already built by private developers.

The plan would initially be piloted in a small area, and those familiar with it say it would not be allowed to become so big it could undermine the private sector.

Reed’s radical policy exploration comes at a time when many ministers are looking at policies that may appeal to an incoming Burnham administration.

The housing secretary has been one of Starmer’s most loyal allies, and continued to defend him even in the final days before the prime minister announced his resignation.

However he did not appear on the steps of Downing Street to see Starmer deliver his resignation speech, and turned up in the Commons later for Burnham’s inaugural photograph as Makerfield MP.

Burnham is likely to be named Labour leader on 17 July, and take office as prime minister three days later. He will set out some of his early policy thinking – including some ideas on devolution and the economy – in a speech in Manchester on Monday.

Ministers are now barred from announcing new policy, but some have got into trouble for pitching ideas in recent days.

In an article last week for the Times, the home office minister, Mike Tapp, suggested exempting foreign care workers from plans to make it harder for migrants to achieve settled status.

His article prompted a government row, with the home secretary, Shabana Mahmood accusing him of leaking internal departmental plans and demanding the prime minister sack him.

No 10 responded by saying Tapp would be “reminded” of his duty to collective responsibility, but that ministerial appointments and dismissals remained in Starmer’s hands.

A spokesperson for the housing department said: “New housing starts have increased by nearly a quarter compared to the same time last year, while last year also saw council housing completions at their highest since 1992. We are always looking at ways that we can go further and build the homes we need.”