Housing minister Grant Shapps confirmed that 326 local authorities would share almost £200m in 2011/12 to incentivise house building in their area.
London councils attracted some of the highest payments with Tower Hamlets topping the list of 326 councils with a £4.29m payment for 2,934 homes being built in its area.
Birmingham was awarded £3.2m and Manchester £2.6m to reinvest in the city.
Shapps called on local authorities to discuss where the money should be spent in their communities.
“The system where Whitehall told communities what homes they need to build never worked,’ he said.
“Housebuilding declined for years, eventually slumping to its lowest peacetime level since 1924.
“The construction industry suffered terribly, and in many areas plans for new homes created a bitter legacy of divided communities and animosity towards developers.’
The Government is committed to match the council tax raised from new homes for the first six years.
The bonus available for an affordable home will be up to 36 per cent more than for a similar market home, equivalent to an extra £350 per house premium every year.
This means councils can receive payments of almost £9,000 on average for each band D home or almost £11,000 for an equivalent affordable home.
