The Local Government Association (LGA) commissioned Cambridge Economics to assess the implications if 100,000 government-funded social rent homes had been built each year over the past two decades.

It found that all housing benefit claimants living in the private rented sector would have been enabled to move to social rent homes by 2016, benefiting to the tune of £1.8 billion in extra disposable income over the period.

The government would have had to borrow an additional £152 billion in 2017 prices to build the homes, but with every £1 spent on building homes generating £2.84 in return, the cost would have been offset by additional tax revenues generated by the construction industry as well as welfare savings from moving housing benefit claimants to lower cost social rent homes.

The rising proportion of housing benefit caseloads in the private rented sector has cost an extra £7 billion in real terms over the last decade.

Cllr Martin Tett, LGA housing spokesperson, said: “Every penny spent on building new social housing is an investment that has the potential to bring significant economic and social returns.

“Now is the time to reverse the decline in council housing over the past few decades. This is the only way to help families struggling to meet housing costs, provide homes to rent and reduce homelessness while also providing economic growth and lowering the housing benefit bill.

“The last time this country built homes at the scale that we need now was in the 1970s when councils built more than 40 per cent of them. With millions of people on social housing waiting lists, councils want to get on with the job of building the new homes that people in their areas desperately need.

“By scrapping the housing borrowing cap, the Government showed it had heard our argument that councils must be part of the solution to our chronic housing shortage. Allowing councils to keep 100 per cent of their Right to Buy receipts is the next step to deliver the renaissance in council housebuilding we need as a nation.”

Polly Neate, chief executive at Shelter, added: “As well as cutting the benefit bill and driving down homelessness, a stable supply of social housing would be a national asset. It would give a step up to families struggling in expensive and unstable rented accommodation, enabling them to put down roots and plan for the future. Children could stay in the same school, support networks and communities could flourish and society as a whole would be better off.”