Councillors agreed to fund a £4m pilot scheme on Thursday that could see the council set up its own lettings company.

At a Cabinet meeting, Newham Council approved the construction of a small block of flats on an undeveloped area of land at Leather Gardens, Abbey Road, Stratford that will be offered to residents as “affordable” rented homes.

The building, which will include a mixture of one and two bedroom flats at an estimated 80 per cent market rent levels, is a pilot project that could see the local authority set up a Private Rented Vehicle to build and purchase homes to let.

This is the first council-initiated building scheme of this scale in over a decade apart from its recent expansion of primary schools in the borough.

The council hope the scheme will complement its compulsory licensing of private properties as it will look to buy homes from failing landlords, with plans to aquire more than 2,000 homes over the next five to ten years.

Cllr Andrew Baikie, executive member for housing and customer service, said: “This ambitious scheme will provide quality affordable homes for hard working people on low incomes as well as creating dozens of jobs for the borough in its construction.

“If it is a success, we hope to expand the scheme across Newham, building new homes and buying properties from failing landlords who want to sell.

“Becoming a player in the private rented sector will enable us to increase the quality housing options available to our residents and raise standards across the industry.”