The government plans to make it easier to add an extra two stories to properties by loosening planning rules.
The government said it wants to usher in a new generation of town houses and ease pressure on space in cities such as London and Manchester.
Sajid Javid, housing secretary, said: “The answer to building new homes isn’t always an empty plot, or developing on a derelict site.
“We need to be more creative and make more effective use of the space we already have available.
“That’s why we are looking to strengthen planning rules to encourage developers to be more innovative and look at opportunities to build upwards where possible when delivering the homes the country needs.”
This proposal will be included in the revised draft National Planning Policy Framework, which is due for consultation this year.
Mark Hayward, chief executive of NAEA Propertymar, said: “We fully welcome any move to increase housing stock – the market is in crisis with a severe lack of available properties, which is pushing prices up and pricing first-time-buyers out of the market.
“The fact that this will enable existing residential areas throughout the UK to expand is especially welcome, as it should increase stock in the areas which most need it, rather than being confined to more expensive urban areas.”