Manchester City Council is to create its own housing development and management business as it steps up its housebuilding output.

The catch is that the new company will not be restricted to fulfilling the council’s affordable housing mission but could act commercially, a report to senior councillors said.

The new development company will be charged with developing "housing on land for rent or sale and to purchase and develop sites,” but the report adds that the company “could act in a commercial capacity” and will be allowed to seek external funding.

The move raises the prospect that the council could create a rival to private sector developers.

The new company will mean the council can develop affordable homes directly, in addition to forming partnerships with other developers, the report said.

Current estimates suggest a council-managed development company could deliver around 1,800 new affordable homes, along with more than 1,000 homes for market sale and rent.

The report warns that the council must be more proactive if it is to meet its housing targets, and says a new development company could provide greater control of what is developed and how it is managed.

The council’s ruling executive is expected to approve further work on the idea at a meeting on 25 March.

Manchester City Council aims to deliver at least 6,400 affordable homes between 2015 and 2025, representing 20% of the total housing delivery target in this period of 32,000 homes. Much of the development will involve building on council-owned land.

Land sales at a discount on market prices are being agreed with developers who agree to provide affordable homes, the most recent example being a £129K discount on the market price agreed on a 2-acre site at Oldham Road, north of the city centre. One Manchester, a housing association, will develop 139 units on the site.

A report will be submitted to a future meeting of the executive that will detail the approach to the new housing delivery company.