According to housing minister John Healey, local authorities have demonstrated that they are willing and able to build new properties.
As a result, he has said he is ready to back them by allowing 73 councils in England to share an extra £122.6 million in funding.
This means that overall public investment in the new house building scheme now exceeds £500 million, while over 4,000 new council houses look set to be created.
Sir Bob Kerslake, head of the Homes and Communities Agency, commented: "The level of interest has been tremendous and demonstrates the appetite of local authorities to lead directly on affordable housing supply."
Mr Healey added that this year's government spending for affordable housing will be the largest amount for at least 20 years.
Work on the new council house building programme got underway in Tyneside last week at a site where 15 properties are to be built.