Lloyds, Britain's biggest retail bank and home lender, said on Tuesday it will set up a 50 million pounds ($81 million) equity fund next year for smaller house builders to help increase supply. The bank said it could expand the funding and potentially work with investment partners or government schemes.

Lloyds Chief Executive Antonio Horta Osorio will say in a speech later on Tuesday that a public policy goal is needed to increase housing supply. He will say an increase of at least 60,000 new homes each year is needed, over and above current numbers, in order to help tackle the supply challenge.

Other options to improve housing supply and affordability include freeing up more public land for housing projects, or making construction on former industrial or commercial sites more economically viable, he will say.

"There is no silver bullet to increasing housing supply. It will take coordinated effort across a range of policy measures, sustained over a decade or more. This is a generational challenge," Horta Osorio will say.

(1 US dollar = 0.6188 British pound)

(Reporting by Steve Slater, editing by Louise Heavens)