A cash reserve that has been boosted by the lull of China's housing market will go toward affordable new homes for low-income families, it was revealed this week.

The Housing Provident Fund, which is contributed to by employers and their staff in return for cut-rate mortgages, had 1.21 trillion yuan ($180 billion) left over at the end of last year.

And to make effective use of the money, the Ministry of Housing and Urban-Rural Development has proposed a trial plan to build houses for poorer citizens across China.

"The proposal will be initiated once it wins the approval of the Ministry of Finance and the central government," said Zhang Qiguang, chief of the department of housing security and public reserve fund supervision and administration, on Monday.

Firms and their employees pay 10-40 percent of their salary to the fund each month. The worker can then apply for a loan at a lower rate of interest than those offered by the nation's banks.

By the end of last year, more than 77 million companies and their staff had deposited a total of 2.1 trillion yuan. After handing out loans worth a combined 1 trillion yuan to 9.6 million people, the fund had 1.21 trillion yuan in reserve - 251.113 billion yuan more than in 2007.

The swell in the fund's reserves have been partially caused by the fact fewer people bought real estate during the fourth quarter of 2007.

Last year, personal loans were 16.564 billion yuan less than in 2007, a drop of 7.52 percent, according to the housing ministry.

Local governments will also work on how to better use the fund, with Sichuan province already vowing to spend it on affordable houses for a trial period. Policies to use the fund will be made this year, said Yu Gui, deputy chief of the provincial department of construction.

Sichuan has also lowered interest rates on housing loans in areas hit by the devastating May 12 earthquake last year, with 6.5 billion yuan lent from the fund. It accounted for 11 percent of total property sales in 2008.

The province's fund is expected to grow by 10 billion yuan to more than 85 billion yuan this year.