Councils should help elderly people move into smaller homes so their properties can be rented to families, the housing minister has said.
Grant Shapps said councils should arrange and manage the rental, but the income would go to the elderly person.
He said it would help with the housing shortage and provide older people with money to pay for any care they need without having to sell their home.
Labour backed the idea, but said more affordable homes still had to be built.
Mr Shapps said his model for the idea was the government-backed FreeSpace pilot project run by Redbridge Council in east London.
Under the scheme, the council will arrange for elderly people to move into rented accommodation, and then take responsibility for maintaining and letting their property at an affordable rate.
The rental income is then passed back to them or their estate.
The government said the scheme would be entirely voluntary, and was about helping older people to continue to live independently - as well as helping younger families to find an affordable property.
"For too long the housing needs of the elderly have been neglected," Mr Shapps said.
"Older people who should be enjoying their homes have watched helplessly as their properties have become prisons, and many have been forced to sell their homes and move into residential care.
Mr Shapps said that for some older people, the move to smaller, more suitable accommodation could make a "life-changing difference".
"They can live independently for longer and enjoy more disposable income without selling their home, and other families can benefit from living in an affordable home," he said.
Under its New Deal for Older People, the government is also providing an additional £20 million to pay for home adaptations so older people can live in their own homes for longer.
Jack Dromey, Labour's shadow housing minister, welcomed the scheme, but said the shortage of affordable housing had not arisen because the elderly were not able to downsize.
"If this government really wants to help young families to get a home, the building workers in the dole queue and those living in unsuitable homes, it should focus on building more affordable homes," he said.
Michelle Mitchell, charity director of Age UK, said: "No-one of any age should feel that they have to move out of their own home unless it is what they want to do.
"Nor should older people be blamed for the scarcity of affordable housing or the economic conditions that make it difficult or impossible for younger people to obtain a mortgage."
But she added: "Many older people have little equity in their homes and so cannot afford alternative housing options, and those who are considering downsizing often find that there is a lack of suitable housing options.
"Therefore, we welcome schemes that give older people more choice and security."