Local authorities in England are to be offered cash incentives to increase house-building levels.
Under the New Homes Bonus scheme, the Government will pay councils the equivalent in council tax raised for each new home built over a six-year period. For a house falling into Band D, that would be around £1,400.
Local authorities are expected to have freedom over how they choose to spend the cash.
Housing Minister Grant Shapps said: "We will not tell communities how or where to build.
"But the New Homes Bonus will ensure that those communities that go for growth reap the benefits of development, not just the costs.
"With house building falling to its lowest level since 1924 under the previous government, action is needed now to build the homes the country needs."
There were 120,000 homes built last year, and 4.5m people in England are on council waiting lists.