There is no apparent ceiling on the money that councils could make if they exceed the targets for new homes set by Ruth Kelly, the Communities and Local Government Secretary.
A Housing and Planning Delivery Grant consultation paper, which is on the DCLG website but was not issued to the national press, suggests that the more houses councils build, the bigger could be the amount paid per house. Councils not reaching a threshold would be starved of cash.
Government figures show that five million new homes are needed in England over 20 years, 1.5 million of them because of record levels of immigration.
A study for the Treasury by Kate Barker, an economist, calculates the number of homes being built each year at 160,000. The Government wants 200,000.
The grant is in line with Miss Barker's recommendations for an incentive that would "help change behavior in local planning decision-making". The proposals pre-empt further proposals by Miss Barker for speeding up the planning system. They are expected this year.
Launching the proposals, Yvette Cooper, the housing minister, said: "Local authorities which are planning for the homes their communities need should benefit as a result. This consultation will give councils the opportunity to give their views on proposals which would give them extra investment to help provide more new housing."