Councils will be offered extra cash for every new home they allow to be built in their areas under a scheme designed to ease housing shortages.
Under the New Homes Bonus, the Government will match the council tax raised on each new dwelling, Housing Minister Grant Shapps will announce.
Town halls, which are braced for a tough squeeze in October's wider public spending review, are expected to be free to spend the money how they wish.
Mr 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."