Sir Keir Starmer is facing calls from his own MPs not to house asylum seekers in newly-built council homes.
Around 200 local authorities, including Brighton and Hove, Hackney, Peterborough, Thanet and Powys, are said to be keen on the scheme, which would fund construction of new properties or refurbishment of abandoned sites for asylum accommodation.
However, several Labour MPs are pressuring the Prime Minister not to go ahead with the plans.
One Labour backbencher, speaking on condition of anonymity, branded the initiative "bonkers" and predicted it "will go down awfully in Red Wall seats".
They told the Daily Mail: "I've told the Home Office I'm against it and they need to U-turn on it in my seat."
Graham Stringer, the Labour MP for Blackley and Middleton South, condemned the initiative as "unacceptable", saying there is already a "shortage of council housing that should be going to local people".
A Government spokesman said: "New council housing will not be used by asylum seekers under any circumstances.
"This Government will close every asylum hotel.
"Work is well underway, with military sites brought forward to ease pressure on communities and cut asylum costs."
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Home Office says murder of Rhiannon Whyte by Sudanese asylum seeker was 'abhorrent crime' after victim's mother says PM has 'blood on his hands'
The Home Office has said the murder of 27-year-old Rhiannon Whyte by Sudanese asylum seeker Deng Chol Majek was an "abhorrent crime" after the victim's mother says the Prime Minister has "blood on his hands".
Ms Whyte was stabbed 23 times by Majek at Bescot Stadium railway station in Walsall on October 20, 2024, after she finished a shift at the nearby Park Inn hotel, where he had been living.
The victim's mother, Siobhan Whyte, told GB News Sir Keir Starmer "needs to be held accountable", saying the PM has "blood on his hands" and the migrant crisis in Britain "needs to stop".
In a statement, a Home Office spokesman told the People's Channel: "The murder of Rhiannon Whyte was an abhorrent crime, and our thoughts are with her loved ones.
"This vile criminal is behind bars where he belongs, and he has rightly received the strictest punishment of a life sentence.
"We share the public’s anger about the broken asylum system and hotels, that is precisely why we are doing everything we can to keep dangerous offenders out of the country and close down hotels."
WATCH: Mother of murdered Rhiannon Whyte says Sir Keir Starmer 'needs to be held accountable'
WATCH: Sir Mel Stride says PM has questions to answer over appointment of Lord Mandelson: 'He has shown no backbone'
Lord Mandelson has 'questions to answer' over links to Jeffrey Epstein, minister says
Lord Mandelson has “questions to answer” over his links to paedophile financier Jeffrey Epstein, a government minister has said.
Education minister Olivia Bailey said she was “pleased” Lord Mandelson had resigned from the Labour Party.
“There were clearly questions that Peter Mandelson would need to answer. He’s taken this decision, it’s the right decision,” she told Times Radio.
But asked whether he should remain a member of the House of Lords she said: “The reality of the removal of a peerage is a complicated one. You have to have been, I believe, sent to jail for over 12 months or an Act of Parliament needs to be passed.
“But… Peter Mandelson has said that he does not intend he is, he is. He is not currently in the House of Lords and I do understand that he does not intend to return.”
Lord Mandelson is currently on a leave of absence from the Lords.
Sir Keir Starmer hints at comeback for Angela Rayner: 'I've always been clear she has a future role to play'
Sir Keir said he would 'like to have Angela [Rayner] back at the right point'
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Sir Keir Starmer has suggested former deputy prime minister Angela Rayner has a “future role to play” in government.
Ms Rayner resigned in September after it emerged she did not pay enough stamp duty on an £800,000 flat in Hove.
Labour’s former deputy leader remains a popular figure within the party and Sir Keir said he wanted to bring her back to the front line “at the right point”.
Ms Rayner, the MP for Ashton-under-Lyne in Greater Manchester, is viewed as a potential successor to Sir Keir or, if she did not run herself, as someone whose support could have a significant influence on the outcome of any contest.
“I would like to have Angela back at the right point. I’ve always been clear she has a future role to play,” the Prime Minister told Times Radio.
“She played a huge part in the achievement that we got at the last election; getting elected, we’ve just passed the Employment Rights Act, which has got her fingerprints all over it.”
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