A new programme of council house building was officially unveiled by the Deputy First Minister yesterday in what could, for some, be the West Lothian answer to the mortgage crisis.

Nicola Sturgeon confirmed the £25m-plus plan, revealed in The Herald last Saturday, in Livingston, which she said would "kick start a new generation of council house building".

The SNP-led West Lothian Council, the first to embark on such a move, will initially spend £7.5m building 240 council houses for rent, with more to follow.

Council leader Peter Johnston said last night: "This is a detailed and extensive new housing capital programme which will benefit our tenants across West Lothian over the next year.

"We will be starting work soon on our programme to build 700 new council houses for rent. The council will be building 240 properties in the first phase and work is under way to identify sites for the remaining 460 houses. We are making a substantial investment in new-build council properties to help meet housing needs in a number of our communities."

He said that, from the funding, £3m will go on environmental improvements, £1.9m on repairs to garages and £9.8m on housing stock improvements.

Ms Sturgeon, told SNP members at their conference last week that the Scottish Government wanted councils to start building again after years when hardly any homes were built by local authorities.

She said she wanted to block the right-to-buy on newly-built council houses, which should make it more attractive for councils to commit to the investment. The new approach is not expected see the return of the large-scale developments of the 1950s, but it should encourage the building of hundreds of homes across Scotland.

West Lothian is the first to push for new homes under the policy and it comes after council housing availability was depleted by sales to tenants and stock transfer. The lack of homes to rent is a key reason why the target of abolishing homelessness by 2012 is thought unrealistic. The Scottish Government aims for more new homes each year by the middle of the next decade, but has not said what share of that should be subsidised.

Ms Sturgeon's plans for more council housing comes as housing associations condemned her "unsustainable and nonsensical" plans to cut grants to them, saying that will combine with the credit crunch to reduce building plans and will push up rents.

The associations, which have been building affordable homes, are furious that Ms Sturgeon is rapidly introducing plans to cut their subsidies, which will force them to borrow more.

The Scottish Federation of Housing Associations also said it would support the funding to councils to help address the "chronic shortage" of affordable rented homes, but it added that the cumulative expertise of the associations should not be ignored.

SFHA chief executive Jacqui Watt said: "We are all agreed that the important thing is that we begin to tackle the shortage of affordable homes in our villages towns and cities. Scotland's housing associations are well placed to provide development expertise, project management and support in developing genuinely mixed communities."